In the matter of Macquarie Investment Management Limited - [2016] NSWSC 1184

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Macquarie Investment Management Limited [2016] NSWSC 1184
Hearing dates: 23 August 2016
Decision date: 23 August 2016
Jurisdiction: Equity
Before: Barrett AJA
Decision:
THE COURT DECLARES THAT:
1. Macquarie Investment Management Limited (MIML) as the responsible entity of the registered managed investment scheme known as the van Eyk Blueprint International Shares Fund (ASRN 103 447 481) (VBI Fund):
(a) in exercising its powers and carrying out its duties with respect to the decision made on or about 6 July 2012 to invest in Artefact Partners Global Opportunity Fund Limited shares (APGOF Shares) and approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act;
(b) in exercising its powers and carrying out its duties with respect to the decision made on or about 17 July 2012 to invest in APGOF Shares and the approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act; and
(c) in exercising its powers and carrying out its duties with respect to the decision made on or about 30 October 2012 to invest in APGOF Shares and the approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act.
2. During the period 15 June 2013 to 9 September 2013, MIML as responsible entity of the VBI Fund permitted members to redeem or withdraw units from the VBI Fund as if the VBI Fund was liquid when the VBI Fund was not liquid, in contravention of s 601FC(1)(b), s 601FC(1)(k) and s 601FC(5) of the Corporations Act.
3. MIML as responsible entity of the VBI Fund, in exercising its powers and carrying out its duties with respect to the investment in APGOF Shares, during the period from 18 February 2013 to no later than 21 July 2014 in not making adequate and timely enquiries of van Eyk in relation to van Eyk's monitoring of the VBI Fund's investment in APGOF Shares (including during the period 1 January 2014 to no later than 21 July 2014, in not making adequate and timely enquiries as to why the Full Redemption had not been paid and when it was likely to be paid), failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act.
AND THE COURT ORDERS THAT:
4. Pursuant to section 1317G of the Corporations Act, the Defendant pay to the Commonwealth a pecuniary penalty of $400,000 within 28 days of the date of these orders.
5. The Defendant pay the Plaintiff’s costs of this proceeding in the agreed amount of $200,000 within 28 days of the date of these orders.

Catchwords: CORPORATIONS – registered management investment scheme – civil penalty proceedings – contraventions admitted by defendant – statement of agreed facts and joint submissions on relief and penalty before the court – need for court nevertheless to exercise judgment – declarations and orders made in agreed form.
Legislation Cited: Corporations Act 2001 (Cth)
Cases Cited: Australian Securities & Investments Commission v Rich [2003] NSWSC 186; 44 ACSR 682
Australian Securities & Investments Commission v Rich [2004] NSWSC 836; 50 ACSR 500
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 90 ALJR 113
Speight v Gaunt (1883) 9 App Cas 1
Category: Principal judgment
Parties: Plaintiff - Australian Securities and Investments Commission
Defendant - Macquarie Investment Management Limited
Representation:
Counsel:
Plaintiff - Mr JR Clarke SC with him Mr DG Healey
Defendant - Mr N Hutley SC with him Ms RCA Higgins
Solicitors:
Plaintiff - Kim Turner of ASIC
Defendant - Andrew Carter of Ashurst Australia

File Number(s): 2016/190085
Publication restriction: Nil

Judgment

BARRETT AJA: These are civil penalty proceedings brought by Australian Securities and Investments Commission (ASIC) against Macquarie Investment Management Limited (MIML), a subsidiary of both Macquarie Group Ltd and Macquarie Bank Ltd.
MIML is engaged in funds management activities. The proceedings arise from MIML's role as the responsible entity of a registered managed investment scheme known as the van Eyk Blueprint International Shares Fund (VBI Fund). The fund was devised by van Eyk Research Pty Ltd. That company arranged for MIML to become the responsible entity on the basis that van Eyk itself would act as investment manager. MIML was contractually bound to implement investment recommendations of van Eyk, subject to complying with its legal obligations.
Three contraventions of the Corporations Act 2001 (Cth) were alleged against MIML by ASIC in relation to the operation of the VBI Fund. Two involved contravention of s 601FC(1)(b) of the Corporations Act; and the third, contravention of both that provision and s 601FC(1)(k). There were thus allegations of failure to exercise the degree of care and diligence that a reasonable person would exercise, if in the responsible entity's position, and failure to ensure that payments were made in accordance with the scheme's constitution and the Corporations Act. These s 601FC(1) elements led to an allegation of contravention of s 601FC(5).
The first of the three areas of alleged contravention involved what was, in effect, unwarranted reliance on van Eyk in the selection of investments and failure to bring adequate independent judgment to bear. The second area of alleged contravention concerned allowing withdrawals when the fund was not liquid. As events came to show, investments selected by van Eyk, on the occasion in question, took more than six months to produce cash when a need for cash should have been met within 30 days. The third shortcoming leading to an allegation of contravention was failure to monitor investments and the activities of van Eyk such that the liquidity issue arose.
MIML accepts that it committed the statutory contraventions alleged against it by ASIC. MIML also accepts ASIC's assessment that the contraventions are serious, and that a civil penalty commensurate with the seriousness of the contraventions should be imposed.
ASIC and MIML have cooperated to produce both a statement of agreed facts and a comprehensive joint document containing agreed submissions on the questions of relief and penalty. I shall refer to the latter document as "the joint submissions document."
The propriety of the court's receiving an agreed position of the parties in matters of this kind is well established. The joint submissions refer to recent High Court authority on that matter (Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 90 ALJR 113). But, as has long been recognised, the court must still exercise its own judgment. It was said more than a decade ago by Bryson J in Australian Securities & Investments Commission v Rich [2003] NSWSC 186; 44 ACSR 682 and by White J in Australian Securities & Investments Commission v Rich [2004] NSWSC 836; 50 ACSR 500, that a declaration of contravention under s 1317E of the Corporations Act, being a declaration on a matter relating to public or analogous rights, should not be made by the consent of ASIC and the person against whom ASIC has proceeded unless the court has a basis for being satisfied by evidence, including agreed facts, that the statutory conditions for the making of the declarations have been fulfilled.
In this case, a full catalogue of agreed facts is before the court and provides a foundation upon which the court may be satisfied as to all relevant matters. Mr Clarke SC, who appeared for ASIC, has taken me specifically to a number of pertinent parts of the agreed facts.
Because of the comprehensive nature of the joint submissions document and the close attention it gives to both the facts as reflected by the statement of agreed facts and legal principles, I take the unusual step of incorporating that document as an appendix to these reasons.
As the joint submissions document shows, MIML was insufficiently attentive to what should have been warning signs concerning relevant investments. MIML did not adequately scrutinise and question recommendations received from van Eyk, the investment manager – recommendations which were not always based on dispassionate arm's-length considerations. MIML did not adequately assess risks and was not sufficiently alert to the possibly adverse consequences of matters coming to its attention. And it did not take action to address potentially adverse information coming into its possession. Some warning signs were recognised, but not further considered. Nor was MIML vigilant on the matter of fund liquidity and the monitoring of investments.
Specific instances of these shortcomings are established, but I do not suggest that the failures were in any sense endemic. There were merely particular instances where systems broke down. Full particulars of MIML's admissions on these matters appear from the joint submissions document.
The case for the making of the declarations of contravention that ASIC seeks by reference to s 1317E has been made out. There is then the question of consequences.
ASIC maintains that a pecuniary penalty should be imposed. MIML does not seek to resist that outcome. It is relevant to note in that connection that, although MIML does not admit any liability for loss suffered by the VBI Fund, it has caused arrangements to be made which have made good that loss. MIML has, from Macquarie's funds, made appropriate payments to make good loss including an interest element. ASIC acknowledges that MIML has thus made good, but does not agree MIML had no responsibility in that respect. In view of the outcome, there is no need for me to pursue that question.
The joint submissions document identifies and discusses considerations relevant to the fixing of a pecuniary penalty. The discussion there supports the agreed position of the parties, which is that there should be a pecuniary penalty of $400,000 in all for the several contraventions. There is also agreement that MIML should make a contribution of $200,000 to ASIC's costs of the proceedings. Both these orders will be made, in addition to the declarations of contravention.
This case highlights the need to emphasise again the basic duty of the responsible entity of a registered managed investment scheme to exercise the care and diligence that a reasonable person would exercise in the same position. Such a responsible entity holds scheme property on trust for scheme members. Section 601FC(2) so provides. Like every trustee, a responsible entity is, as Lord Blackburn pointed out over a century ago in Speight v Gaunt (1883) 9 App Cas 1 at 19, bound to take "all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own.”
The 1993 joint report of the Australian Law Reform Commission and the Companies and Securities Advisory Committee on which the present regulatory regime is based was entitled simply Other People's Money. These are three words that all operators in this field must bear constantly in mind.
I make declarations and orders as follows:

THE COURT DECLARES THAT:

1. Macquarie Investment Management Limited (MIML) as the responsible entity of the registered managed investment scheme known as the van Eyk Blueprint International Shares Fund (ASRN 103 447 481) (VBI Fund):
(a) in exercising its powers and carrying out its duties with respect to the decision made on or about 6 July 2012 to invest in Artefact Partners Global Opportunity Fund Limited shares (APGOF Shares) and approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act;
(b) in exercising its powers and carrying out its duties with respect to the decision made on or about 17 July 2012 to invest in APGOF Shares and the approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act; and
(c) in exercising its powers and carrying out its duties with respect to the decision made on or about 30 October 2012 to invest in APGOF Shares and the approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act.

2. During the period 15 June 2013 to 9 September 2013, MIML as responsible entity of the VBI Fund permitted members to redeem or withdraw units from the VBI Fund as if the VBI Fund was liquid when the VBI Fund was not liquid, in contravention of s 601FC(1)(b), s 601FC(1)(k) and s 601FC(5) of the Corporations Act.
3. MIML as responsible entity of the VBI Fund, in exercising its powers and carrying out its duties with respect to the investment in APGOF Shares, during the period from 18 February 2013 to no later than 21 July 2014 in not making adequate and timely enquiries of van Eyk in relation to van Eyk's monitoring of the VBI Fund's investment in APGOF Shares (including during the period 1 January 2014 to no later than 21 July 2014, in not making adequate and timely enquiries as to why the Full Redemption had not been paid and when it was likely to be paid), failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act.

AND THE COURT ORDERS THAT:

4. Pursuant to section 1317G of the Corporations Act, the Defendant pay to the Commonwealth a pecuniary penalty of $400,000 within 28 days of the date of these orders.
5. The Defendant pay the Plaintiff’s costs of this proceeding in the agreed amount of $200,000 within 28 days of the date of these orders.

APPENDIX

Introduction

1. This is the joint submission of the plaintiff (ASIC) and the defendant (MIML) as to relief, including the appropriate pecuniary penalties to be imposed, in respect of MIML’s admitted contraventions of s 601FC(1)(b) and s 601FC(1)(k) of the Corporations Act 2001 (Cth) (Corporations Act) as set out in the Originating Process.

2. Facts agreed between the parties are set out in the in the Statement of Agreed Facts (SOAF) tendered by the parties. [1] For the purpose of this proceeding only, pursuant to s 191 of the Evidence Act 1995 (Cth), MIML has made the admissions set out in the SOAF. This submission employs terms as defined in the SOAF.

1. SOAF [1]

3. MIML is a public company and is a subsidiary of Macquarie Group Limited and Macquarie Bank Limited. At all material times, MIML held, and holds, an AFSL. It is authorised, amongst other things, to operate a registered managed investment scheme in its capacity as a responsible entity. [2]

2. SOAF [3]

4. MIML or a related entity in the Macquarie Group is the responsible entity (RE) of about 106 registered managed investment schemes. [3] These proceedings relate to MIML's conduct as the RE of a registered managed investment scheme known as the van Eyk Blueprint International Shares Fund (ASRN 103 447 481) (VBI Fund). [4]

3. Due to a restructure, a successor responsible entity in the Macquarie Group has taken over from MIML the role of responsible entity for some of these 106 registered managed investment schemes

4. SOAF [4]

5. The VBI Fund is part of a series of funds known as the van Eyk Blueprint funds which were developed by an investment research house and manager, van Eyk Research Pty Limited (in liquidation) (van Eyk). In addition to the VBI Fund, MIML was RE for 13 other Blueprint funds, including 3 funds that invested directly into the VBI Fund. Until it was placed into liquidation, van Eyk was the investment manager for each of the Blueprint funds. [5]

5. SOAF [10]-[12]

6. MIML carried out its role as RE of the VBI Fund as part of its "RE for hire" business. The funds were established at the instigation of the investment manager who has a primary role in identifying and managing the investments, and who identifies the entity it wishes to act as RE. The RE in turn agrees to act as the RE and to appoint the instigating investment manager to provide investment management and other services to the fund. [6] That was the case here. van Eyk’s appointment as investment manager was disclosed to investors.

6. SOAF [12]

7. As at July 2012, MIML was the RE of approximately 142 registered managed investment schemes, of which (at that time) 27 funds were part of MIML's “RE for hire” business. [7] MIML and the Macquarie Group are in the process of exiting their "RE for hire" business, and expect to have completed that process by the end of this year (subject to concluding the winding up of the remaining four van Eyk Blueprint Funds). [8]

7. SOAF [5]

8. SOAF [6]

8. The proceedings concern three aspects of MIML's role in relation to the investments made by the VBI Fund in Artefact Partners Global Opportunity Fund Limited (APGOF), a Cayman Islands “exempt” company, and approval of the appointment of Artefact Partners (Cayman) Ltd (Artefact Cayman) and Artefact Partners LLP (Artefact Partners) as an underlying investment manager.

9. The first aspect relates to the three decisions by MIML, as RE of the VBI Fund, to approve investments by way of subscription for shares in APGOF, and contraventions of s 601FC(1)(b) of the Corporations Act that occurred in so doing. The three investments in APGOF are referred to in the Originating Process and in these submissions as the First Investment, which occurred on or about 6 July 2012, the Second Investment, which occurred on or about 17 July 2012, and the Third Investment, which occurred on or about 30 October 2012.

10. The second aspect relates to the failure by MIML, as RE of the VBI Fund, in exercising its powers and carrying out its duties with respect to the investment in APGOF, to make adequate and timely enquiries of van Eyk in relation to van Eyk’s monitoring of the VBI Fund’s investment in APGOF, and a contravention of s 601FC(1)(b) that occurred in so doing.

11. The third aspect relates to the conduct of MIML, as RE of the VBI Fund, in permitting members of the VBI Fund to redeem or withdraw units from the VBI Fund as if the VBI Fund were “liquid” as defined in section 601KA of the Corporations Act) when the VBI Fund was not liquid, during the period 15 June 2013 to 9 September 2013, in contravention of s 601FC(1)(b) and s 601FC(1)(k).

Permissibility of Joint Submissions

12. The High Court has recently reaffirmed the propriety and permissibility of a plaintiff regulator and a defendant making joint submissions on penalty. A court is not precluded from receiving and, if appropriate, accepting an agreed or other civil penalty submission: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Others; Construction, Forestry, Mining and Energy Union & Another v Director, Fair Work Building Industry Inspectorate & Another (2015) 90 ALJR 113, 326 ALR 476, [2015] HCA 46 (CFMEU v FWBII) at [1], [103].

13. Equally, there is nothing in CFMEU v FWBII precluding the Court from receiving and, if appropriate, accepting a joint submission on liability, based on admissions of fact and consent orders. Where the imposition of a civil penalty under s 1317G of the Corporations Act is dependent upon the Court granting declaratory relief under s 1317E of the Corporations Act, the Court may also receive and, if appropriate, accept submissions as to such declaratory relief.

14. In all cases it remains the task of the Court to be satisfied that the orders sought are appropriate: CFMEU v FWBII at [48], [110]; Australian Securities and InvestmentsCommission v Maxwell (2006) 59 ACSR 373, [2006] NSWSC 1502 (ASIC v Maxwell) at [136].

15. A court will be mindful of the circumstance that not all of the evidence which would have been adduced on a contested hearing is before it and that the agreed position is likely to include aspects of compromise: ASIC v Maxwell at [145]. See also CFMEU v FWBII at [109].

Brief Outline of Relevant VBI Fund Documents

16. The VBI Fund was established by the "Constitution of the van Eyk Blueprint International Shares Fund", executed by MIML on 17 January 2003, as amended by Amending Deeds Poll dated 8 September 2008 and 30 June 2011 (VBI Constitution). [9]

9. SOAF [15]

17. The VBI Fund also relevantly had:

(1) a Product Disclosure Statement dated 21 June 2012 (PDS) accompanied by and incorporating an Information Booklet dated 21 June 2012; [10] and
(2) a Compliance Plan (VBI Compliance Plan). [11]
10. SOAF [22]-[23]
11. SOAF [24]

18. The VBI Constitution provided, or was to the effect that, among other things:

(1)   the RE must hold the Assets on trust for Members (clause 2.1);
(2)   the RE must satisfy a redemption request from Trust Assets (as defined in the VBI Constitution) at the Redemption Price (as defined in the VBI Constitution) and payment must be made within 30 days of receipt of the request or such longer period as allowed by clauses 7.5 or 7.6 (clause 7.4);
(3) redemption procedures in clauses 7.4 to 7.11 only apply when the Trust is ‘Liquid’, as defined in the Corporations Act (clause 7.3);
(4) where the Trust is not Liquid a Member may withdraw from the Trust only in accordance with any current withdrawal offer made by the RE in accordance with the Corporations Act (clause 7.13);
(5)   the RE had all powers in respect of the VBI Fund that was possible under the law to confer on a trustee and as though it were the absolute owner of the assets of the VBI Fund (clause 11.1);
(6)   the RE may invest in, dispose of or otherwise deal with property and rights of the VBI Fund, in its absolute discretion (clause 11.3);
(7)   the RE may authorise any person to act as its agent or delegate to perform any act or exercise any discretion within MIML's power (clause 11.4);
(8)   the RE may in its absolute discretion decide how and when to exercise its powers (clause 11.7); and
(9) the RE was not liable to Members of the VBI Fund for any loss suffered in any way relating to the VBI Fund, except to the extent that the Corporations Act imposed liability (clause 17.1).

19. Clause 16.3 of the VBI Constitution also provided that the RE may take and act upon:

(1) advice, opinions, statements or information from persons consulted by the RE who are in each case believed by the RE in good faith to be expert in relation to the matters upon which they are consulted (cl 16.3(b)); and
(2) a document provided to the RE in connection with the Trust upon which it is reasonable for the RE to rely (cl 16.3(b)),

and that the RE will not be liable for anything done, suffered or omitted by it in good faith in reliance upon such opinion, advice, statement, information or document.

20. Section 1 of the PDS stated that MIML had "appointed van Eyk Research…as the Investment Manager to advise in the construction of the Fund's portfolio and the selection of the external underlying managers (Underlying Managers). van Eyk provides direction on the proportion of the Fund allocated to each asset class and to each Underlying Manager, in accordance with its research and investment guidelines".

21. Section 3 of the PDS set out the benefits of investing in the VBI Fund and its significant features, the first being stated as “Provides exposure to a diversified portfolio of international shares”. The significant benefits of the VBI Fund were stated as including “Provides access to Underlying Managers, highly regarded by van Eyk, and which van Eyk expects to outperform, relative to other van Eyk rated managers, over the next three years” and “Offers the potential for risk management through active allocation to Underlying managers according to van Eyk’s investment research and monitoring”.

22. Section 4 of the PDS referred to "Risks of Managed Investment Schemes", and included "Liquidity risk", being that "Investments may be difficult or impossible to sell, either due to factors specific to that security, or to prevailing market conditions", and "Investment Manager Risk". This included that "The Underlying Managers selected by van Eyk may fail to achieve their investment objectives, and the underlying investments may experience loss. Neither van Eyk nor Macquarie will have input into the investment decisions of the Underlying Managers."

23. Section 5 of the PDS stated the VBI Fund’s objective as “The Fund aims to provide capital growth over the longer term.” Section 5 included a "Description of “the Fund" which included statements that "The Fund provides exposure to a diversified portfolio of international shares" and "may also hold derivatives, listed managed investments, foreign exchange, cash and short-term money market securities". Further, it stated that: "The Fund is constructed to provide exposure to a blend of Underlying Managers highly regarded by van Eyk with complementary styles to suit, in van Eyk's opinion, different market conditions" and that "The Underlying Manager allocation is actively managed by van Eyk". It further stated “Asset allocations” as “International shares exposure 100%” with the footnote that “The Fund is expected to be fully invested. A portion of the portfolio may be allocated to cash for liquidity purposes.” Section 5 identified the "Risk level" of investing as "Medium to High".

24. Section 5 concluded with “Fund performance”, stating, inter alia:

Performance history information can be obtained from van Eyk’s website at blueprint.vaneyk.com.au or by calling Client Service. ...

25. The Information Booklet, which was incorporated in the PDS and was provided to investors, at section 1, described van Eyk as follows: [12]

About van Eyk
van Eyk, established in 1989, is a leading provider of investment research to the Australian financial planning industry.
As well as Underlying Manager selection, van Eyk specialises in investment research relating to portfolio construction and management, asset allocation and direct share research. van Eyk is independently owned and receives no payment from fund managers for their ratings.
van Eyk specialises in:
> Qualitative investment research
> Asset consulting services to institutions, with over $70bn in assets under van Eyk's advice
> Advising financial planners in selecting fund managers, constructing portfolios and asset allocation for their clients
> Direct share research and model portfolios.
12. SOAF [23(a)]

26. At section 5, the Information Booklet said that "portfolios are constructed in line with van Eyk's research views, which can be summarised as…investing through Underlying Managers that van Eyk considers to be highly regarded and which van Eyk expects to outperform, relative to other van Eyk rated managers". [13] Section 5 further stated that "The Funds may invest though [sic] well-known Underlying Managers as well as boutique strategies not normally available to retail investors", and continued: "Where applicable, van Eyk reviews an Underlying Manager's people, processes and business management to arrive at a qualitative assessment of the Underlying Manager" and that "van Eyk also makes an assessment of whether an Underlying Manager's style will be, what they consider, suitable to market conditions". Section 5 further stated: "van Eyk is responsible for active asset allocation within and between classes, through active management of the overall investment style of the Funds."

13. SOAF at [23(c)]

27. The VBI Compliance Plan provided or was to the effect that, inter alia, MIML was to ensure that:

(1) applications, redemptions and transfer of units were dealt with in accordance with the Corporations Act, including as to when the VBI Fund was not liquid (2006 Compliance Plan, pages 7, 22, 23; 2012 Compliance Plan, pages 3, 19); and
(2) investments of the VBI Fund were in line with the VBI PDS, risk management statement, VBI Constitution and the Corporations Act (2006 Compliance Plan, pages 7, 25; 2012 Compliance Plan, pages 3, 21, 22).

28. MIML appointed van Eyk (an authorised representative of van Eyk Financial Group Pty Ltd) as the investment manager for the VBI Fund. The parties entered into an Amended and Restated Business Agreement dated 2 April 2009 (Business Agreement) (which replaced an earlier 2003 agreement). [14]

14. SOAF [18]

29. Pursuant to the Business Agreement, van Eyk was:

(1)   to provide advice to MIML regarding the strategic and tactical asset allocation of the VBI Fund (Schedule 2, para 1, pg 21);
(2)   to provide a written recommendation to MIML prior to an investment manager and its product being approved by MIML. The written recommendation was to enclose a copy of van Eyk’s research concerning the underlying manager selection, the product and the rationale for inclusion (Schedule 2, para 2, pg 23);
(3)   responsible for ongoing monitoring of Underlying Managers of the Funds (within the limits referred to in the Business Agreement) and providing reports to MIML on a quarterly basis and informing MIML of any event which could adversely affect an underlying manager's ability to perform its role as underlying manager (Schedule 2, paras 2 and 3, pg 23).

30. Under clause 3 of the Business Agreement, MIML was:

(1) required to invest the VBI Fund’s assets in accordance with van Eyk’s recommendations, subject to complying with its obligations under the law and the VBI Fund’s constitution; and
(2) implement as soon as practicable any recommendation of van Eyk given from time to time given under Schedule 2 as to an Underlying Manager in respect of a fund, subject to complying with its obligations under law, the VBI constitution and the recommended underlying manager meeting MIML’s due diligence criteria (as provided in writing by MIML to van Eyk).

31. The Information Booklet (pg 7) and the Business Agreement (Schedule 2, pg 23) each contained an explanation of the requirements for, respectively, “appointing” or selecting an underlying manager (that is, the criteria for investment of the VBI Fund into another investment “fund” which was itself managed by a third party).

32. Schedule 2, clause 2 on pg 23 of the Business Agreement provided that:

(i)   vE will recommend to Macquarie the Underlying Managers of the Funds which have no indexing component ... . Unless otherwise agreed in writing by the parties, all Underlying managers recommended for initial and ongoing inclusion in the Funds must be:
(a)   rated A or better by vE, or
(b)   rated BB for sectors without A or AA rated managers and vE considers that the investment environment is favourable to that sector for the manager to be selected; or
(b)   “Endorsed” by vE in connection with vE alliance partners’ research; or
(c)   If a manager in the Portfolio has been downgraded to a BB, vE may elect to hold interests in that manager if, in vE’s opinion, that manager may benefit from the investment environment or to manage portfolio turnover; or
(d)   identified as “Analyst Expression” and unrated, in which case tactical weightings of between 0-25% of the total allocation per sector will be allowed; or
(e)   an index strategy. (Emphasis added.)

33. Section 5 of the Information Booklet relevantly said: [15]

Underlying Manager selection

For an Underlying Manager to be selected by van Eyk, it must first be considered as highly regarded under one of the following categories:

1.   the Underlying Manager must be rated AA. A or BB by van Eyk with a preference given to the higher AA and A rated managers, though this will depend on available capacity, comparable fees and other aspects van Eyk considers relevant, or
…
3.   where investment research has been undertaken by of [sic] van Eyk's alliance research partners, the Underlying Manager must be 'Endorsed'2 by van Eyk, or
4.   a 'high conviction' candidate that falls outside of the review process, referred to as 'Analyst Expression'3, or
…[Footnote 2 stated: An Underlying Manager which is ‘Endorsed’ has been rated highly enough by one of van Eyk’s alliance research partners and van Eyk endorses it as a highly regarded investment vehicle].
[Footnote 3 stated: Where an Underlying Manager is included under the 'Analyst Expression' category, van Eyk may make a tactical allocation to a maximum of 25% within the Fund. This category allows candidates in whom van Eyk's analysts have a high level of conviction, that fall outside the normal review process, to be included in the Fund.]
15. SOAF [23(c)]

Decision by MIML to Approve Investment in APGOF and Appointment of Artefact

34. As at 30 June 2012, the VBI Fund had approximately $148 million in funds under management. [16]

16. SOAF [63]

35. On about 6 July 2012, MIML approved the appointment of Artefact as underlying manager and the initial investment in APGOF. The VBI Fund subsequently invested a total of $32.6 million in APGOF comprising the First Investment, the Second Investment and the Third Investment. APGOF was a company incorporated in the Cayman Islands that had issued capital in the form of redeemable shares and described itself as a collective investment scheme and carried on the business of investing. [17] APGOF had appointed Artefact Cayman as its investment manager, which in turn sub-delegated its investment management role and power to carry out investment transactions to Artefact Partner. [18] Richard Boon was the founder, chief investment officer and significant shareholder of Artefact Cayman, and was chief executive officer and member of Artefact Partners. [19]

17. SOAF [30], [33]

18. SOAF [31]

19. SOAF [32]

36. MIML made the decision to approve Artefact as underlying manager for the VBI Fund and approved the VBI Fund’s investment into APGOF on 6 July 2012, subject to satisfaction of certain conditions, which MIML says were satisfied between 6 July and 10 July 2012.

37. The chronology of facts relevant to the recommendation by van Eyk to MIML and approval by MIML for the VBI Fund to invest in APGOF and to appoint Artefact as underlying manager is set out in the SOAF at [34]-[58].

38. In summary, the process for the investment into APGOF was as follows:

(1)   van Eyk “recommended” or “selected” APGOF for inclusion in the VBI Fund portfolio;
(2)   Artefact was provided with MIML’s Due Diligence Questionnaire (the DDQ), which included a schedule prepared by MIML setting out the minimum service standards applying to underlying managers of the van Eyk Blueprint Funds;
(3)   Artefact responded to the DDQ through van Eyk and its responses were circulated within MIML;
(4)   following review, further requests for clarification were sent by MIML to Artefact, through van Eyk. As a result, Artefact provided van Eyk with a revised version of the DDQ as well as responses by email to various other questions raised by MIML. van Eyk passed these, along with the APGOF Offering Memorandum, on to MIML. Artefact also provided information regarding the concentration limits applying to the APGOF and its liquidity profile;
(5)   van Eyk confirmed that it was selecting Artefact under the “Analyst Expression” category of underlying manager (this being category (d) referred to in the extract at paragraph 31);
(6)   upon receipt of responses from Artefact and van Eyk, the investment was approved.

39. MIML was provided with the following in connection with approving the investment into APGOF:

(1)   a series of emails through which van Eyk sought to make a recommendation of Artefact, including selection of Artefact under the “Analyst Expression” category;
(2)   Artefact’s responses to the DDQ;
(3)   the APGOF offering memoranda;
(4)   the APGOF financial statements for FYE 31 December 2011;
(5)   the APGOF fact sheets for early and late 2011 and APGOF newsletter for Q4 2011;
(6)   van Eyk and Artefact responses to follow up queries from MIML in relation to, amongst other things, pricing frequency, redemption frequency, concentration of holdings (including concentration limits), liquidity profile, compliance monitoring and rating of Artefact or reliance on ‘Analyst Expression’.

40. The investment was approved by MIML because (and see further paragraphs 92 to 94 below):

(1)   the investment was recommended by the VBI Fund’s investment manager, van Eyk;
(2)   the responses to the DDQ and other information were assessed and deemed satisfactory; and
(3)   MIML considered that the information received from Artefact and van Eyk indicated the investment complied with the VBI Fund’s PDS and the operational aspects of the investment (including timing of pricing/distribution and tax information) were in line with MIML’s operational requirements.

41. However, as at the date of the decision to make the first investment in APGOF (the First Investment) and to appoint Artefact as underlying manager, MIML did not address adequately the combined effect of the following risks or matters relevant to a decision to invest in APGOF Shares:

(1)   Mr Boon was the founder, significant shareholder, and Chief Investment Officer of Artefact Cayman and a member and the Chief Executive Officer of Artefact Partners. Mr Boon held between 84% and 95% of Artefact Cayman and was further in charge of compliance oversight (there being only one other employee of Artefact Partners). This led to a risk that decisions made by Artefact Partners might not be made in compliance with the APGOF Offering Memorandum, the APGOF Memorandum and Articles of Association or other laws or documents by which APGOF, Artefact Cayman or Artefact Partners were bound;
(2)   the fund size of APGOF was small compared to the proposed investment in APGOF to be held in the VBI Fund;
(3)   on the terms of the Offering Memoranda for APGOF and the side letters, it was possible for MIML to make a redemption request which would not be satisfied in full within a 30 day period (although the answers in section 5.9 of the due diligence questionnaire referred to in paragraph [38(2) above] stated that "Daily inflow/outflow requests will be accommodated by the fund with a view toward payment within 30 days", and any decisions with respect to timing of payment could only be lawfully made in accordance with the duties of the directors of APGOF);
(4)   van Eyk had not provided MIML with any written recommendation, report or research supporting a selection or rating of APGOF, Artefact Cayman or Artefact Partners in circumstances where the Business Agreement required van Eyk to provide it and entitled MIML to obtain it;
(5)   the performance of APGOF on the materials provided by APGOF suggested on its face that APGOF was not performing profitably;
(6)   the rights and obligations attached to the APGOF Shares by virtue of the Articles and Memorandum of Association of APGOF;
(7)   the Offering Memoranda and DDQ for APGOF stated that the Fund's investment objective was "to seek to achieve positive annual returns, regardless of market conditions, and to generate long-term capital growth, by investing in a concentrated portfolio of equity positions". This was consistent with statements made in the audited financial accounts. However, the Offering Memorandum and DDQ also referred to a broad range of potential investments and included statements that: "There are no material limitations on the investment strategies that the Investment Manager may employ on behalf of the Fund … " and further that "The investment objectives and methodology … represent the Investment Manager’s intentions as of the date of this Memorandum. Depending on conditions and trends in the financial markets and the economy in general, but subject always to the stated principal investment objective of the Fund, the Investment Manager may employ any investment techniques or purchase any type of security that it considers appropriate and in the best interests of the Fund, whether or not described in this section …";

(8)   the reliability and completeness of responses given to MIML by Mr Boon on behalf of APGOF, Artefact Cayman and Artefact Partners (such as by independently communicating with APGOF's external third party compliance consultants);
(9)   MIML did not know and had not obtained from van Eyk reasons as to why van Eyk had recommended investing in APGOF or what alternative investments were available or had been considered by van Eyk;
(10)   MIML did not adequately consider for itself the competence, capability or the merits of APGOF, Artefact Cayman or Artefact Partners to invest and manage the moneys subscribed in the First, Second and Third Investments and did not do so as against existing or alternative investments;
(11)   MIML did not make independent enquiries (including of APGOF's external compliance consultants) as to whether APGOF, Artefact Cayman or Artefact Partners had an efficacious compliance regime and had the resources to comply with as well as a track record of complying with APGOF’s offering memoranda, its constituent documents or representations made by APGOF, Artefact Cayman or Artefact Partners;
(12)   MIML did not undertake its usual procedure with respect to having the investment risk analysed by its Investment Risk team before execution of the subscription documents for the First Investment;
(13)   MIML, in its due diligence, placed undue reliance on van Eyk and the responses given by Artefact Partners on behalf of APGOF.

42. At the time the First Investment was made, the VBI Fund had approximately $148.6m funds under management. The First Investment was funded by the redemption of other investments held as scheme property of the VBI Fund. [20]

20. SOAF [63]

43. Upon making the First Investment, approximately 18.2% of the VBI Fund scheme property constituted APGOF Shares. The VBI Fund's investment comprised approximately 57% of the aggregate value of shares in APGOF. [21]

21. SOAF [64]

Second Investment

44. On 17 July 2012, the VBI Fund made the Second Investment in APGOF. At the time the Second Investment was made, the VBI Fund had approximately $148.6m funds under management. [22]

22. SOAF [78]

45. Upon making the Second Investment, approximately 20.33% of the VBI Fund scheme property constituted APGOF Shares. The VBI Fund's investment comprised approximately 59% of the aggregate value of shares in APGOF. The Second Investment brought the VBI Fund's total funds invested in APGOF to $29.5 million. [23]

23. SOAF [79]

Third Investment

46. Prior to the Third Investment, there were further communications between MIML and van Eyk concerning aspects of some of the risks identified relating to the investment in APGOF, and certain side letters were prepared though not executed. [24]

24. SOAF [80]-[86]

47. MIML also corresponded with Mr Boon, including a question from MIML regarding APGOF’s “investable universe”, to which the reply from Mr Boon was “unconstrained; all cap, all sectors, but typically companies of 1bn or more and can own fixed interest and unlisted investments”. [25] That reply also stated that APGOF's concentration limit was 20% but the largest investment was currently 5% and historically was 10%. [26]

25. SOAF [89] - [90]

26. SOAF [90]

48. On 28 September 2012, Ms Lemon emailed MIML's Product Manager stating "Attached is the Artefact ratings report – some of the details in the back relating to SLA is dependent on side letter (sic) which I’m waiting to receive (inclusive of 0% base fees)." The report attached to Ms Lemon's email was entitled "Baker Street Capital, International Equities Review 2012 - September 2012” (Baker Street Ratings Report) and stated on page 2 that its purpose was: “To evaluate the effectiveness of Baker Street Capital in managing the Artefact Partners Global Opportunities Fund.”

49. Baker Street Capital was not then, nor did it ever become, the manager of APGOF or an underlying manager of the VBI Fund. The Baker Street Ratings Report concerned an organisation described as Baker Street Capital. The Baker Street Ratings Report did not comment on the competence of Artefact Cayman or Artefact Partners or selection of APGOF as an investment already made or proposed to be made. It dealt with a hypothetical, being the suitability of Baker Street Capital to manage APGOF. The Baker Street Ratings Report rated Baker Street Capital “AA”, the highest of van Eyk’s ratings.

50. Nobody on behalf of MIML took any action as a result of receipt of the Baker Street Ratings Report.

51. After making the First Investment, MIML did not request or receive any rating reports, as referred to in the email exchange between Ms O’Connor and Ms Lemon on 5 July 2012 referred to at SOAF paragraphs 50(b) and 51(a)(i), or any written recommendation that included van Eyk’s research on Artefact Partners, Artefact Cayman and APGOF and rationale for the inclusion as an underlying investment /underlying manager of VBI as van Eyk was required to provide by Schedule 2 of the Business Agreement.

52. Notwithstanding that fact, as part of a quarterly certification regime for fund managers set up between MIML and van Eyk, from about April 2013 van Eyk began certifying to MIML that APGOF was an “AA” rated underlying manager whereas, previously van Eyk had been certifying that APGOF was rated “Analyst Expression”. The Business Agreement required van Eyk to provide, and MIML had the right to request, a rating paper supporting an AA rating. Nobody on behalf of MIML questioned the "AA" rating or requested a ratings paper supporting the “AA” rating.

53. Prior to the Third Investment, MIML also received a Third Offering Memorandum (which made 2 changes to the previous offering memorandum) and received the Memorandum of Association and the Articles of Association that governed the rights attaching to the APGOF Shares, including rights of redemption and payment of redemption proceeds. At no time prior to 15 October 2012 had MIML requested or reviewed a copy of APGOF’s memorandum of association or articles of association. [27]

27. SOAF [99]

54. On 30 October 2012, the Third Investment in APGOF Shares was made. At the time the Third Investment was made, the VBI Fund had approximately $142.8m funds under management. [28]

28. SOAF [105]

55. Upon making the Third Investment approximately 22.55% of the VBI Fund scheme property constituted APGOF Shares, and the VBI Fund's investment in APGOF comprised approximately 68% of the aggregate value of shares in APGOF. The making of the Third Investment brought the VBI Fund's total investment in APGOF to A$31.43 million gross (including redemptions) with a share value of A$32.26 million (including redemptions and performance adjustments). [29]

29. SOAF [106]

56. As at the dates of each of the Second and Third Investments, MIML accepts that it did not address adequately the combined effect of the same risks and matters identified above with respect to the First Investment, relevant to a decision to invest in APGOF Shares. [30]

30. SOAF [113]-[116]

57. Further, in relation to the Third Investment, before the time MIML made the Third Investment, MIML had received a copy of the Baker Street Report and did not take any action to question or re-evaluate the appropriateness of the investment in APGOF, the competence of Artefact Partners or Artefact Cayman or whether MIML should redeem its investment or refrain from making further investments in APGOF or require explanation from van Eyk.

Managed investments scheme provisions

58. Chapter 5C of the Corporations Act replaced Chapter 5C of the Corporations Law, which was introduced by the Managed Investments Act 1998 (Cth). It replaced the prescribed interest regime which was a dual party structure involving a manager and a trustee.

59. A joint report by the Australian Law Reform Commission and the Companies and Securities Advisory Committee (ALRC Report No 65, 1993) found that the dual party structure was fundamentally flawed. In particular, the role of the trustee, originally intended to be that of a mere custodian, had evolved to the point where the distinction between the respective roles and duties of the trustee and manager were not understood. The joint report recommended, and the Parliament accepted, that for every scheme there should be a single entity (in due course called the responsible entity) in which the functions of both trustee and manager were united: see the discussion by Finkelstein J in Spangaro v Corporate Investment Australia Funds Management Ltd [2003] FCA 1025 at [1]; ASIC v Wellington Capital Limited [2013] FCAFC 52 at [47].

60. Under Chapter 5C, the responsible entity must be a public company that holds an Australian financial services license (AFSL) authorising it to operate a managed investment scheme: s 601FA. The responsible entity is to operate the scheme and perform the functions conferred on it by the scheme’s constitution and the Corporations Act: s 601FB(1).

61. Importantly, the responsible entity holds scheme property on trust for scheme members: s 601FC(2). That is a critical provision: Treecorp Aust Ltd (in liq) v Dwyer (2009) 175 FCR 373 at [37] (Gordon J). The effect of s 601FC(2) is that the section declares in unequivocal terms that the responsible entity of a registered management investment scheme holds scheme property on trust for scheme members: ASIC v Wellington Capital Limited [2013] FCAFC 52 at [48]; Treecorp Aust Ltd (in liq) v Dwyer (2009) 175 FCR 373 at [37], citing Investa Properties Ltd v Westpac Property Funds Management Ltd (2001) 187 ALR 462 at [12]. Accordingly, it was held in Re Mirvac Ltd (1999) 32 ACSR 107 that the responsible entity under a registered managed investment scheme is a trustee for the purposes of that legislation.

62. The responsible entity is subject to a series of express duties which mirror those of any trustee responsible for the maintenance and investment of trust property or funds: s 601FC(1).

63. Section 601FB(2) confers specific power on a responsible entity to appoint an “agent” or “otherwise engage a person” to do anything the responsible entity is authorised to do in connection with the scheme. An “agent” may hold scheme property “on behalf of the responsible entity”: s 601FB(4).

64. The constitution of a scheme must make adequate provision for the powers of the RE in relation to making investments and dealing with scheme property (s 601GA). Section 601GB requires that the constitution be legally enforceable as between the members and the RE (as the VBI Constitution is per clause 27.4).

Duties of MIML

65. In exercising its powers and carrying out its duties under the VBI Constitution and the Corporations Act, MIML was obliged, inter alia, to:

(1) exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML’s position (s 601FC(1)(b) of the Corporations Act);
(2) ensure that all payments out of scheme property of the VBI Fund were made in accordance with the VBI Constitution and the Corporations Act (s 601FC(1)(k) of the Corporations Act);
(3) carry out or comply with any other duty, not inconsistent with the Corporations Act, that was conferred on MIML by the VBI Constitution (s 601FC(1)(m) of the Corporations Act).

66. Section 601FC(5) provides that a RE who contravenes s 601FC(1) thereby contravenes s 601FC(5). This is a civil penalty provision for the purposes of s 1317E.

67. The VBI Constitution made provision for members to withdraw from the scheme, wholly or partly, while the scheme was liquid (as defined in s 601KA(4) and (5)) (clauses 7.1 to 7.11).

68. The VBI Constitution made provision for members to withdraw from the scheme, wholly or partly, in accordance with Part 5C of the Corporations Act while the scheme was not liquid, as defined in the Corporations Act (per clause 27.1) (clauses 7.13 to 7.15). Where clause 7.13 applies, members may only withdraw in accordance with a current withdrawal offer made in accordance with the Corporations Act (see s 601KB to s 601KE). This implies that the RE may not redeem units where the VBI Fund is not liquid.

69. Clause 27.6 provides that, except as required by the Corporations Act, all restrictions on the exercise of the RE’s powers or obligations which might otherwise be implied or imposed by law or equity are expressly excluded to the extent permitted by law, including any obligation of the RE in its capacity as RE of the Trust arising under any statute.

Section 601FC(1)(b): The scope of the duty of care and diligence

70. Pursuant to s 601FC(1)(b) of the Corporations Act, in exercising its powers and carrying out its duties, the RE of a registered scheme must exercise the degree of care and diligence that a reasonable person would exercise if they were in the RE’s position.

71. A number of matters may be observed about the scope of that duty.

72. First, the duty of the RE under s601FC(1)(b) is to exercise care and diligence in exercising its powers and carrying out its duties as the RE of the relevant scheme. Those powers and duties include the power to invest the scheme property and the responsibility to do so pursuant to the mandate of the scheme, subject to the Act.

73. Second, s 601FC(1)(b) is cast in similar terms to the duty of care and diligence of a director of a corporation contained in s 180(1) of the Corporations Act. Accordingly, authorities on s 180(1) may be relevant in terms of the standard of care and diligence required although the position of an RE is not identical to that of a company director.

74. Third, it is self-evident that the provision requires care and diligence to be exercised. The degree of care and diligence is to be measured against that which would be expected of a reasonable person if they were in the RE’s position. By requiring the RE to exercise “the degree of care and diligence that a reasonable person would exercise if they were in the RE’s position”, the provision sets out an objective test to measure the reasonableness of the actions taken by the RE in exercising its powers and carrying out its duties (similarly to s 180(1)).

75. Fourth, the fact that the statutory duty refers to the standard by reference to the reasonable person, “if they were in the responsible entity’s position”, means that in determining the scope of the duty of care and diligence, and whether there has been a breach of that duty, it is important to have regard to the circumstances of the relevant RE’s position, and the registered scheme, including: the type of scheme, the provisions of its constitution, the size and nature of its operations, the functions to be performed, the experience or skills of the RE and the circumstances of the specific case: see ASIC v Maxwell (2006) 59 ACSR 373 at 397 at [100]; and see ASIC v Rich [2009] NSWSC 1229 at [7201].

76. Fifth, the standard of care imposed by the provision, like s 180(1), is similar to that imposed by the law of negligence: see Vines v ASIC (2007) NSWLR 451 at [137], [142]. It follows that it may be appropriate to refer to the principles developed under law of professional negligence in determining the content of the duty: ASIC v Vines (2005) 55 ACSR 617 at [1070] ff.

77. Sixth, the scope and content of the duty are heavily influenced by the purpose of the particular power being exercised or duty being carried out, and the known reliance and vulnerability of those dependent on the carrying out of the duty: see, in the context of directors' duties, ASIC v Vines (2005) 55 ACSR 617 at [1085]. This is particularly relevant to the placing at risk of the scheme property of a registered scheme.

78. Seventh, as a general matter, and subject to the terms of the particular trust (or here a managed investment scheme), a trustee is expected to exercise a degree of restraint, against the duty of a company director to display “entrepreneurial flair”: Australian Securities Commission v AS Nominees Limited (1995) 62 FCR 504 at 516-518 per Finn J. In the context of professional trustee companies, who hold themselves out as having certain expertise, there is a “requirement of caution”: Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; 133 ALR 1; 18 ACSR 459. This is sometimes referred to as the prudent investor rule and applies to the exercise by the trustee of its power of investment. This duty of a trustee is applicable to a RE exercising its powers and the standard of care applicable when considering s 601FC(1)(b).

79. In Wallace Funds Management Pty Ltd v Wallace Absolute Return Ltd [2009] NSWSC 190, Palmer J said that “Where the trustee managing investments for others is a professional, the duty of prudence and skill is judged according to professional, rather than lay standards: see e.g. Armitage v Nurse [1998] Ch 241; s 14A Trustee Act 1925 (NSW).”

80. In Bartlett v Barclay’s Bank Trust Co Ltd (No 1) [1980] 1 Ch 515 at 534, Brightman J observed that:

Just as under the law of contract, a professional person possessed of a particular skill is liable for breach of contract if he neglects to use the skill and expertise which he professes, so I think that a professional corporate trustee is liable for breach of trust if loss is caused to the trust fund because it neglects to exercise the special skill which it professes to have.

81. In In re Whiteley (1886) 33 Ch D 347 at 355, it was held that where a trustee makes an investment, the trustee is to exercise the degree of care that an ordinary prudent person would take if he or she was minded to make an investment for the benefit of other people to whom he or she felt morally bound to provide.

82. Eighth, nonetheless, the exercise of prudence and caution must be considered through the prism of the particular registered scheme in question, having regard to its constitution and particular investment mandate, and the profile of the accepted risks and potential returns the subject of the investments that may be undertaken pursuant to the registered scheme. In Hanrahan, Funds Management in Australia, (LexisNexis Butterworths, 2007) at [2.34], the author states:

So how does the requirement of caution apply in the context of commercial investment trusts? The general law standard of care in relation to trustee investments does not work in such a way as to prohibit a funds management company from making high-risk investments. The rule does not require the company to eschew a high-risk investment strategy where that is the nature of the scheme that has been marketed to investors. Rather, it requires the company to implement the advertised strategy prudently. Although its application in a commercial context is yet to be fully explored fully by an Australian court, Dr Paul Ali has concluded that ‘it is likely that Australian courts will interpret this rule as requiring fiduciaries to assess proposed investments in the context of their impact on the risk profile and return objectives of the entire trust fund, having regard to modern investment models and techniques’.
In other words, the fund management company is not required to alter the advertised investment strategy to accord with the requirement of caution; instead, it must implement that investment strategy (whatever it is) in a manner consistent with the requirement. (footnotes omitted)

83. In this case it is relevant that the PDS for the VBI Fund described the risk level of "Medium to High" (see paragraph 23 above).

84. Ninth, whilst an RE is entitled to place reliance on others, including advisers, there is a core and irreducible requirement of diligence: see in the context of directors' duties, Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113 at [108] to [109].

85. Tenth, while it has been noted that the point seems open to argument at the appellate level, there is authority that the standard of care and diligence required is not lowered by the fact that a breach of the provision could give rise to a civil penalty: ASIC v Vines (2005) 55 ACSR 617 at [1094].

86. In summary, the standard of care and diligence is one which a reasonable person would exercise, acting in MIML’s position, in the capacity as RE of the VBI Fund, and subject to the VBI Constitution and other fund documents, in its capacity as a specialist manager and RE for reward of registered schemes, carrying on the business of a professional trustee, and where it held itself out as having securities investment management capabilities across a number of asset classes, including equities and multi-asset allocation solutions as part of that business, and as part of MIML conducting an “RE for hire” business where MIML and van Eyk had agreed on and investors had been informed of van Eyk's role in recommending or advising in the selection of investments . That is, the standard that a professional trustee would exercise in the circumstances, to implement the relevant investment strategy for the VBI Fund, in accordance with the VBI Fund strategy, with prudence and caution.

Contraventions arising out of Investments

Admissions of contraventions arising out of the Investments

87. By reason of the combined effect of the matters set out in the SOAF at paragraphs [34] to [111], and [113] to [115] and summarised above, in contravention of s 601FC(1)(b), in exercising its powers and carrying out its duties as RE of the VBI Fund with respect to the decision to invest by way of the First Investment, the Second Investment and the Third Investment and the approval of Artefact Cayman or Artefact Partners as an underlying manager, MIML failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position. [31] While in many respects the matters set out in the SOAF at paragraphs [34] to [111] and [113] to [115] are addressed above, these submissions note certain further matters below.

31. SOAF [116]

88. Further, for the purposes of s 1317G of the Act, each of the contraventions with respect to the First Investment, the Second Investment and the Third Investment is serious. [32]

32. SOAF [117]

MIML was required to duly consider the proposed investment

89. While MIML's duty under section 601FC(1)(b) is informed by van Eyk's involvement (as discussed above), MIML, as RE of the VBI Fund, was nevertheless required to take steps to consider the investment in order to comply with s 601FC(1)(b) irrespective of the appointment of van Eyk as manager and the recommendation and advice (or "advice on selection" as it was disclosed in the PDS being provided by van Eyk.

90. The Business Agreement between MIML and van Eyk was consistent with this. MIML was required to invest in accordance with van Eyk’s recommendations, but subject to its obligation to comply with the VBI Fund’s constitution and relevant laws or its duties as RE: para 3 at pg 5 of the Business Agreement; Schedule 2, pg 22 of the Business Agreement.

91. Notwithstanding the appointment of van Eyk, MIML remained responsible to adequately consider any proposed investment or appointment of underlying manager put forward by van Eyk, in accordance with its obligations under s 601FC(1)(b) of the Act. Indeed, MIML conducted a due diligence process accordingly.

Actions taken by MIML in recognition of duty

92. MIML conducted a due diligence process in the course of its decision whether or not to invest in APGOF Shares. In particular, as part of that process:

(1)   MIML raised issues concerning Richard Boon's ownership of the fund and the fact that he was also in charge of compliance oversight. It received assurances that APGOF was supported in its compliance and accounting arrangements by independent providers, and was provided with APGOF's annual compliance calendar; [33]
(2)   MIML raised issues concerning concentration risk and the amount of APGOF that could be invested in any one holding and received assurances that a maximum of 20% of the net asset value was allowed on any long holding, the largest position historically had been 10%, the portfolio would typically have between 15 and 25 positions, and 85% of the portfolio is in liquid positions with an average size of 0.5% of average daily trading volume (with the percentage in illiquid positions to shrink substantially upon new investment (i.e., investment by the VBI Fund)); [34]
(3)   MIML raised concerns about management expense ratios and was informed that material changes would be notified and a cap would be imposed; [35]
(4)   MIML raised concerns that APGOF was unable to meet MIML's service level agreements as well as pricing and liquidity concerns. MIML received assurances that APGOF would meet MIML's service level agreements and would move from monthly to providing daily net asset values and unit prices, [36] and that daily inflow/outflow requests would be accommodated by the fund with a view toward payment within 30 days; [37] and
(5)   MIML requested, and was provided with, APGOF's audited financial accounts and derivative risk statement, which included further information about APGOF's performance, assets, investment objective, investment strategies and holdings. [38]
33. SOAF [42], [44(a)(i)], [44(b)(v),(vi)]
34. SOAF [42], [44(a)(iii)], [44(b)(xii)]
35. SOAF [42], [44(a)(iv)]
36. SOAF [42], [44(a)(v)], [44(b)(ix),(x),(xiii)], [51(a)(ii)]
37. SOAF [44(b)(x)
38. SOAF [42], [44(c),(d)]

93. Having undertaken the due diligence process referred to above and having considered the responses and material referred to above, as at the time of the First Investment, Second Investment and Third Investment: [39]

39. SOAF [112]

(1)   MIML's understanding was that Artefact would invest in international equities;
(2)   MIML understood that Richard Boon was a seasoned professional with over 25 years in the funds management industry;
(3)   MIML thought it relevant that there was an external compliance firm involved in the compliance function of APGOF, and that APGOF appeared from its due diligence responses to be compliance aware, and considered this relevant in assessing the risks associated with the relatively small size of APGOF;
(4)   Artefact had confirmed, and MIML understood:
i.   that Artefact’s policy at that time was that no more than 20% (and historically no more than 10%) of Artefact would be invested in any single holding;
ii.   before MIML's investment, 85% of Artefact was in liquid positions (with an average size of 0.5% of average daily trading volume), and that the percentage of Artefact invested in liquid positions would increase substantially following MIML's investment in Artefact;
iii.   Artefact would be priced daily and allow weekly redemption requests to be made (this being a concession obtained by MIML);

(5)   MIML considered the references to Artefact's flexibility regarding its investment strategy in its answers to the Due Diligence Questionnaire and in the Offering Memorandum, referred above:
i.   to be common for international shares funds of that type established in the Cayman Islands;
ii.   to relate to Artefact's strategies to achieve its investment objective, and to be read subject to that objective, which was to invest in a concentrated portfolio of international (from the point of view of APGOF) equities, unlisted stock, debt securities, cash and derivative instruments;

(6)   MIML formed the view that the investment in Artefact was permitted under and consistent with the terms of the Product Disclosure Statement for the van Eyk Fund;
(7)   MIML relied on the audited financial statements in relation to the nature of the underlying investments which at the time of investing were held by Artefact; and
(8)   relied on van Eyk's selection of Artefact in addition to its own due diligence as described above.

94. Here, a further relevant aspect of MIML's position is that van Eyk's role as investment manager and its role in recommending (or “advising in the selection”, as described in the PDS and Information Booklet) and in relation to the VBI Fund more generally had been agreed between MIML and van Eyk and disclosed to investors (see e.g., paragraphs 20 to 23 above).

Failure to carefully and properly assess the proposed investment

95. Pursuant to the Business Agreement, van Eyk was to provide advice to MIML regarding the strategic and tactical asset allocation of the VBI Fund (Schedule 2, para 1, pg 21) and to provide a written recommendation to MIML prior to an investment manager and its product being approved by MIML. The written recommendation was to enclose a copy of van Eyk’s research concerning the underlying manager selection, the product and the rationale for inclusion (Schedule 2, para 3, pg 23).

96. In relation to the proposed investment in APGOF and approval of Artefact as underlying manager, van Eyk did not provide MIML with a copy of van Eyk’s research concerning the underlying manager selection, the product and the rationale for inclusion. Further, MIML did not require that van Eyk provide this information.

97. It follows that no-one within MIML, including most significantly the product manager, knew the basis upon which van Eyk recommended Artefact as underlying manager, or the basis upon which any specific recommendation was made regarding the investment with Artefact. No such explanation or basis for that investment recommendation was ever sought or provided. MIML did not receive a copy of van Eyk’s research concerning the underlying manager or the product and the rationale for inclusion, as required to be provided under the Business Agreement, para 2 Schedule 2 (p23), including any note recording the basis of the Analyst Expression decision taken by van Eyk.

98. The position can be contrasted with an underlying manager rated “AA”. MIML could have required, and van Eyk would have been obliged to provide, a research paper assessing a manager of the highest standing. However, an unrated manager (Artefact) was allowed to pass without any support for the assertion that it was “highly regarded” or there was a “high level of conviction” in the manager’s ability.

99. The failure of van Eyk to provide MIML with any written recommendation, report or research supporting a selection or rating of APGOF, Artefact Cayman or Artefact Partners, and the failure of MIML to seek such, was relevant to the decision to invest in APGOF. [40]

40. SOAF [113](d)]

100. Accordingly:

(1) MIML did not know and had not obtained from van Eyk the reasons why van Eyk had recommended investing in APGOF or what alternative investments were available or had been considered by van Eyk; [41] and
(2) MIML did not adequately consider for itself the competence, capability or the merits of APGOF, Artefact Cayman or Artefact Partners to invest and manage the moneys subscribed in the First, Second and Third Investments and did not do so as against existing or alternative investments. [42]
41. SOAF [113](i)]
42. SOAF [113](j)]

101. In addition:

(1) MIML did not make independent enquiries (including of APGOF's external compliance consultants) as to whether APGOF, Artefact Cayman or Artefact Partners had an efficacious compliance regime and had the resources to comply with as well as a track record of complying with APGOF’s offering memoranda, its constituent documents or representations made by APGOF, Artefact Cayman or Artefact Partners; [43] and
(2) MIML, in its due diligence, placed undue reliance on van Eyk and the responses given by Artefact Partners on behalf of APGOF. [44]
43. SOAF [113](k)]
44. SOAF [113](m)]

102. Further, as part of the due diligence undertaken by MIML, MIML did not undertake its usual procedure with respect to having the investment reviewed and analysed by the Investment Risk Team before execution of the subscription documents. [45] After the decision to invest had been made, a member of MIML's Investment Risk Team reviewed the Offering Memorandum on 10 July 2012, [46] though not for the purpose of undertaking MIML’s usual pre-investment due diligence process but in order to determine whether the investment in APGOF was permitted by comparing the Offering Memorandum with MIML's investment guidelines for VBI. [47] This was not MIML's usual procedure. This was a relevant and significant omission as the investment risk team was responsible (along with the product manager) for considering and analysing the proposed investment, which from a proper due diligence perspective and in terms of the duty imposed by s 601FC(1)(b) to take proper care and diligence, including when deciding whether the scheme should invest in a particular investment, was fundamental.

45. SOAF [113](l)]

46. being the same member of the Investment Risk Team referred to in the SOAF at [65] and [67] to [69] who requested the Offering Memorandum for the purpose of updating MIML’s Dimension system

47. SOAF [65] to [69]

103. Further, there were various other issues requiring further consideration and assessment the combined effect of which was not adequately addressed by MIML.

104. First, issues were raised within MIML in relation to compliance within Artefact. [48] Ms So in her email dated 21 June 2012, made comments arising out of the responses received to the DDQ, and referred to “ownership and segregation of duties concerns” relating to Mr Boon owning between 85-95% of Artefact and his being in charge of compliance. Mr Hogan also observed in his email dated 3 July 2012 that Artefact was a “very small shop” with a “lack of segregation of duties” specifically in relation to Mr Boon as compliance officer. [49]

48. SOAF [42]

49. SOAF [45]

105. Mr Boon sought to answer the concerns raised by Ms So, by email dated 3 July 2012. [50] Mr Hogan received that response from Mr Boon but nevertheless set out his similar concerns later that day, 3 July 2012. [51]

50. SOAF [44],

51. SOAF [113](h)], [45]

106. There was therefore a risk that decisions made by Artefact might be made by Mr Boon without adequate or proper oversight, not in compliance with the APGOF Offering Memorandum, the APGOF Memorandum and Articles of Association or other laws or documents by which APGOF, Artefact Cayman or Artefact Partners were bound. This risk was relevant to the decision to invest in APGOF.

107. Second, and relatedly, issues were raised within MIML in relation to the small size of APGOF (prior to investment by the VBI Fund) relative to the proposed investment by the VBI Fund. [52] Specifically, these concerns were raised by Ms So in her email dated 21 June 2012, and by Mr Hogan in his email dated 3 July 2012.

52. SOAF [113](b)

108. Mr Boon’s response by email dated 3 July 2012 (which preceded Mr Hogan’s email later that day) asserted that the overall size of APGOF would become significant.

109. Third, on the terms of the APGOF Offering Memorandum, it was possible for MIML to make a redemption request that may not be satisfied within 30 days. [53] This was raised in Ms So’s email dated 21 June 2012. While MIML obtained from APGOF an assurance in section 5.9 of the due diligence questionnaire (provided on 3 July 2012) that "Daily inflow/outflow requests will be accommodated by the fund with a view toward payment within 30days", and any decisions with respect to timing of payment could only be lawfully made in accordance with the duties of the directors of APGOF (where observance of such duties may or may not lead to payment within 30 days), the subsequent side letters that were prepared but remained unsigned post-dated the First Investment and did not modify the timing for payment of the redemption proceeds after shares had been redeemed. This was also relevant to the decision to invest in APGOF.

53. SOAF [113](c)

110. Fourth, the materials provided by APGOF suggested that APGOF was not performing profitably. [54] Ms So sought in her email dated 21 June 2012 the latest audited financial accounts. On 3 July 2012, the latest audited accounts were received, being for December 2011. [55] Those accounts were accompanied by an audit report from KPMG. They showed that the fund had made a net investment loss of about $2 million and a total loss of almost USD 2.7 million [56] and underperformed the MSCI World Index by about 10%. This was relevant to the decision to invest in APGOF.

54. SOAF [113(e)]

55. SOAF [44(d)]

56. SOAF [44(d)(iv)]

111. Fifth, in respect of the investment mandate of APGOF, the Offering Memorandum for APGOF referred to a broad range of potential investments by APGOF. [57] As set out above, the fund objectives of the VBI Fund were “to provide investors with exposure to a diversified portfolio of international shares.” The VBI Fund invested in a range of specialist underlying funds that provided exposure to international shares.

57. SOAF [113](g)]

112. The Offering Memorandum for APGOF stated that APGOF's investment objective was "to seek to achieve positive annual returns, regardless of market conditions, and to generate long-term capital growth, by investing in a concentrated portfolio of equity positions". [58] There was a statement to similar effect in APGOF's audited financial accounts. [59]

58. SOAF 52(a)]

59. SOAF [44(d)(v)]

113. However, the Offering Memorandum and the Responses to the DDQ prepared by Artefact stated that the investment manager of the APGOF:

builds a concentrated portfolio from the bottom up, after qualitative screening, fundamental research and drawing on specific sector knowledge, in order to seek to deliver superior absolute returns over a medium term investment horizon (of approximately three years). In pursuing its investment objectives, the Fund may exploit a wide range of investment opportunities, throughout global markets, as they arise. The Investment Manager has broad flexibility in selecting the investment and trading strategies implemented by the Fund. Short-term volatility will be tolerated in pursuing absolute returns.
There are no material limitations on the investment strategies that the Investment Manager may employ on behalf of the Fund or the markets or countries in which the Fund may invest or trade.

114. It continued that the Fund “depending on the conditions and trends in the financial markets and economy in general, but subject always to the stated principal objective of the Fund, the Investment Manager may employ any investment techniques or purchase any type of security that it considers appropriate and in the best interests of the Fund, whether or not described in this section”. [60] This was consistent with all versions of the APGOF Offering Memorandum.

60. SOAF [38(d)]; DDQ responses at pp 4-6, 2.6

115. While MIML regarded Artefact as a concentrated portfolio of international equity stocks, these matters were also relevant to a decision to invest in APGOF.

Baker Street Report

116. Mr Hogan commented to Ms O’Connor in his email dated 3 July 2012 that: “I would be asking for quite a bit of backup justifying their selection of this manager… No doubt Keith, Roger and we should be concerned at this selection.”

117. Mr Hogan’s comment that “we should be concerned about this selection” may have led Ms O’Connor to seek a copy of the ratings paper from van Eyk (which she did on 5 July). [61] However, while she was informed van Eyk was "in the process of formalising a ratings report" [62] she was then advised that it would not be ready for 2-3 weeks. [63] It would seem there was no further request for the information that supported the basis and rationale for the proposed investment. That information should have been sought.

61. SOAF [50(b)]

62. SOAF [51(a)(i)]

63. SOAF [53]

118. It was not until late September 2012 that a ratings paper was given to Ms O’Connor, and even then it was not concerned with Artefact but rather with Baker Street Capital.

119. Following receipt of that report, no action was taken to follow up how Artefact and Baker Street Capital related to each other. Rather, the evidence from 3 July 2012 to 6 July 2012 suggests that, MIML accepted the position adopted by van Eyk that MIML ought to accept recommendations made by van Eyk under the ‘Analyst Expression’ category so as to make a determination to invest without being provided with the ratings report.

200. It may sometimes be appropriate to impose a penalty in respect of each category of contravention. [89]

89. Trade Practices Commission v Bata Shoe Company of Australia Pty Ltd [1980] ¶ATPR 40-162 per Lockhart J at [42,277]; Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] FCA 855 at [82]; Australian Competition and Consumer Commission v Singtel Optus Pty Limited [2011] FCA 761 at [77]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249, [2012] FCAFC 20 at [52]-[53]; Australian Competition and Consumer Commission v TPG Internet Pty Limited (No 2) (2012) ¶ATPR 42-402, [2012] FCA 629 at [73]-[75] (reversed on other grounds in [2013] FCAFC 37, appeal allowed in the High Court and relevant orders reinstated (2013) 250 CLR 640, [2103] HCA 54); Australian Competition and Consumer Commission v Apple Pty Limited [2012] FCA 646 at [41]; Australian Competition and Consumer Commission v Telstra Corporation Limited (2010) 188 FCR 238, [2010] FCA 790 (ACCC v Telstra) at [225]-[230].

201. However, cases of apparent “course of conduct” must still be considered carefully. It is not necessarily the case that a “failure of process” which has an impact at different times, upon different people, at different locations or involving different staff of a defendant must be treated in a global way, though the totality principle may still apply: ACCC v Telstra at [225]- [228].

202. In ASIC v Idyllic Solutions, Ward JA referred to the decision of Brereton J in ASIC v Maxwell in relation to conduct that gave rise to multiple contraventions and conduct comprising a course of conduct. In ASIC v Maxwell, Brereton J held in effect (at [148]) that particular conduct which results in the ability to classify that conduct as a contravention of various provisions of the Corporations Act is not intended by the legislation to create “multiple jeopardy”. Brereton J made a single declaration in respect of the relevant conduct, but the form of single declaration actually made records the contravention of the various provisions of the Corporations Act (see Schedule A after [244]).

203. Where there is a course of conduct involved, Brereton J also held in effect (at [147]) that there should be a declaration of contravention in respect of each act or default within that course of conduct. However, his Honour in that case acquiesced in the agreed position of the parties to treat the contraventions within the course of conduct as a single contravention on the basis that it caused no prejudice to the defendant. After going through the processes his Honour referred to at [147] and [148] and considering the penalties applicable, one then considers totality.

204. In ASIC v Idyllic Solutions, the various contraventions were grouped together in 5 sets but Ward JA considered that it was not open to the Court to levy a penalty, in effect, upon each set. Her Honour preferred, in reliance on Pearce v R and Vines v ASIC at [19], to assess penalty on a contravention by contravention basis, then apply principles of cumulation and concurrence to arrive at, effectively, a similar result.

205. Ward JA imposed a penalty in respect of one contravention in a group and applied cumulation and concurrence and avoided imposing a penalty on what was, in substance, the same conduct to avoid “multiple jeopardy”. The totality principle was then applied to reduce maximum penalties in each category within reasonable bounds accommodating the purpose of the penalty. See also Australian Securities and Investments Commission v Macdonald (No 12) (2009) 73 ACSR 638, [2009] NSWSC 714 per Gzell J at [301]–[304]; Gillfillan v Australian Securities and Investments Commission (2012) 92 ACSR 460, [2012] NSWCA 370 at [190].

206. The parties submit for the purposes of these proceedings that the conduct here is such that there should be a declaration of contravention for each of the First, Second and Third Investment, but on the basis that the Court's assessment of penalty may be informed by the above principles relating to course of conduct, having regard to the particular circumstances of this case, including SOAF [113] as it applies to all three investments, SOAF [114] in relation to the first investment and SOAF [115] in relation to the third investment.

207. Having regard to the totality principle does not mean that the maximum penalty for a single contravention operates as the upper limit of penalty in respect of multiple contraventions, though it may be a useful yardstick: Mornington Inn v Jordan at 389; ACCC v Telstra at [199]ff; Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1, [2010] FCAFC 39 at [42]; Australian Competition and Consumer Commission v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041, [2004] FCA 1750 at [143].

Matters relevant to assessing deterrence

208. Even though the purposes of civil penalty proceedings include deterrence, the consequences may be large and punishing: CFMEU v FWBII at [102] citing Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2005) 216 CLR 161, [2003] HCA 49 at [114] (198-199). On the other hand, the penalty must be fixed with a view to ensuring that the penalty is not such as to be regarded by the offender as an acceptable cost of doing business: CFMEU v FWBII at [110].

209. A factor to consider is whether the defendant relied upon professional advice. In Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (2014) 103 ACSR 1 (ASIC v APCH), Murphy J dealt with a contravention of s 601FD of the Corporations Act which entailed the giving of a benefit to a director or a related entity of a director. As to reliance on professional advice, Murphy J held at [169] that, had the directors exercised the proper level of care and diligence and taken an appropriately cautious approach, they would not have accepted and followed the advice they were given. They were entitled to rely on advice but not at the expense of their non-delegable duty of care: Australian Securities and Investments Commission v Healey (2011) 196 FCR 291, [2011] FCA 717 at [162]. If they had exercised ordinary care they would have known that the advice was not to be relied upon: Daniels (Formerly Practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438 at 502-504 per Clarke and Sheller JJA.

210. In that case, the multiple contraventions spanned 2 years. Murphy J held at [34] that in some circumstances it may not even be necessary for the court to determine the precise number of contraventions arising from a party's conduct (at least where there is a course of conduct and the totality principle will be applied): Australian Competition and Consumer Commission v Neighbourhood Energy Pty Ltd [2012] FCA 1357 at [44]; Australian Competition and Consumer Commission v Pepe's Ducks Pty Ltd [2013] FCA 570 at [39]. However, separate contraventions arising from separate acts should each be assessed: ASIC v APCH at [36], citing Registrar of Aboriginal and Torres Strait Islander Corporations v Matcham (No 2) (2014) 97 ACSR 412, [2014] FCA 27 at [197].

211. The importance of general deterrence means that sometimes a penalty will be imposed which is higher, perhaps considerably higher, than the penalty that would otherwise be imposed, having regard only to the circumstances of that offender, ASIC v APCH at [91] citing Australian Competition and Consumer Commission v High Adventure Pty Ltd (2006) ATPR 42 091, [2005] FCAFC 247 at [11] per Heerey, Finkelstein and Allsop JJ, although no one should be sacrificed to the public interest: Re One.Tel Ltd (in liq); Australian Securities andInvestments Commission v Rich (2003) 44 ACSR 682, [2003] NSWSC 186 at [26] per Bryson J.

212. Even though there may be no indication that a defendant will contravene a civil penalty provision in the proximate future, a penalty must be imposed which will act as a reminder to it and the community of the consequences of the admitted contraventions and this can be the most significant factor in determining penalty in particular cases: ACCC v Telstra at [204]. This can be so even where no loss is caused to the public: Singtel Optus v ACCC at [57].

213. In Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR ¶40-091 at [17,896] it was held that a penalty should be sufficiently high to have a deterrent quality and it should be kept in mind that the legislation operates in a commercial environment where deterrence of those minded to contravene its provisions is not likely to be achieved by penalties which are not realistic. It should reflect the will of Parliament that the commercial standards laid down must be observed, but a penalty should not be so high as to be oppressive.

214. In Australian Competition and Consumer Commission v Visy Paper Pty Ltd (No 2) (2005) 212 ALR 564, [2004] FCA 1471 at [49] Sackville J held that the size of the contravenor is relevant because the object of deterrence is unlikely to be achieved by the imposition of a small penalty on a large corporation.

215. In ASIC v APCH at [98], Murphy J cites the Full Federal Court in Australian Securities and Investments Commission v Beekink (2007) 61 ACSR 205, [2007] FCAFC 7 at [118]-[119], noting the difficulties in quantifying penalties by reference to other cases, in particular the fact that “the value of money erodes over time” and “in recent years the courts have been more concerned with the need for imposition of higher civil penalties to reflect community expectations of the standards to be imposed on company directors”.

216. The maximum penalty for a single contravention is $200,000 pursuant to s 1317G of the Corporations Act.

217. In ACCC v ABB Transmission, Finkelstein J considered at [40] that, although punishment by pecuniary penalty is not levied on the parent entity in a group of companies, the size of the parent entity cannot be ignored because if it was otherwise corporations could easily organize their affairs so that penalty could be kept to a minimum. See also Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 at [128].

218. However, there is more recent authority, of the Full Court of the Federal Court, that a contravenor being part of a large corporate group will factor in the exercise of the Court’s discretion where there is evidence that the parent company bore some responsibility for the conduct of the respondent, or where it is relevant to the subsidiary's capacity to meet a penalty: Schneider Electric (Aust) Pty Ltd v ACCC [2003] FCAFC 2 at [49]; (2003) 127 FCR 170; see also ACCC v Fila Sport Oceania Pty Ltd [2004] FCA 376 at [34]-[36]; [2004] ATPR 41-983. [90]

90. Cf ACCC v ABB Power Transmission Pty Ltd [2004] FCA 819; [2004] ATPR 42-011.

Proper assessment of penalty

219. Assessment of penalty is not an exact science: NW Frozen Foods v ACCC at 290; CFMEU v FWBII at [47]. It is not a process that leads to a single correct answer arrived at by some process admitting of mathematical precision or neat arithmetic algorithm or simple mechanical process: Pearce v R at 624; ASIC v Adler at [70], [126].

220. Hence, while pecuniary penalties imposed in one case provide a guide, that guide will seldom if ever be able to be used mechanically: ACCC v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618, [2002] FCA 192 at [34] per Hill J; NW Frozen Foods v ACCC at 295. See also Australian Securities and Investments Commission v Parkes (2001) 38 ACSR 355, [2001] NSWSC 377 at [180]. However, some guidance can be derived from the principles and factors identified above: ASIC v Adler at [126].

221. Penalty is to be assessed by an intuitive or instinctive synthesis: ASIC v Adler at [140], Wong v R (2001) 207 CLR 584, [2001] HCA 64 at [75].

222. The task of the court is to take account of all of the relevant (and potentially competing) factors and to arrive at a single result which takes due account of them all. That is what is meant by saying that the task is to arrive at an “instinctive synthesis”: Markarian v R (2005) 228 CLR 357, [2005] HCA 25 at [37] (374) per Gleeson CJ, Gummow, Hayne and Callinan JJ; CFMEU v FWBII at [56]. This involves taking into account the objective circumstances of the contravention and the subjective factors relating to the contravenor: Trade Practices Commission v Caravella (1994) ATPR ¶41,927; Trade Practices Commission v Prestige Motors Pty Ltd (1994) ¶41-359 at [42,699] per Lee J.

223. Careful assessment must also be paid to the maximum penalty pecuniary penalty set for each contravention because they have been legislated for, they invite comparison between the worst possible case and the case before the court, and in that regard they provide a yardstick to be taken and balanced with the other relevant factors: see Markarian v R (2005) 228 CLR 357 per Gleeson CJ, Gummow, Hayne and Callinan JJ; ASIC v APCH at [106].

224. In terms of agreed penalties, the question which the Court asks is whether the parties’ proposal can be accepted as fixing an appropriate penalty, even if the court, unaided by the parties submissions, may have come to a different amount: CFMEU v FWBII at [28], [48], [58]; NW Frozen Foods v ACCC at 290-291, 298-299.

Application of principles to the present case

225. The relevant contraventions are identified in the declarations.

226. The first set of declarations, concerning contraventions of s 601FC(1)(b) of the Corporations Act, relates to the lack of care and diligence by MIML in relation to the investment due diligence and decision-making process within MIML involved in the decision to invest in a series of investments in the APGOF Shares and the approval of Artefact as underlying manager in respect of those investments.

227. The second declaration, concerning a contravention of s 601FC(1)(b) and s 601FC(1)(k) of the Corporations Act, relates to the lack of care and diligence by MIML in the ongoing administration of the VBI Fund arising out of the liquidity of the VBI Fund and breach of the constitution in paying out redemptions while the fund was illiquid.

228. The third declaration, concerning a contravention of s 601FC(1)(b) of the Corporations Act, relates to the lack of care and diligence by MIML in the ongoing administration of the VBI Fund involving the failure to make adequate and timely enquiries of van Eyk in relation to van Eyk’s monitoring of the VBI Fund’s investment in APGOF, including maintaining the investment in APGOF Shares.

229. Each of the contraventions the subject of the declarations involved a departure from the requisite standard of care and diligence expected of MIML, in respect of its duties as RE of the VBI Fund, as the professional trustee of the Fund.

230. Further, the potential or actual consequences of the contraventions must be considered.

231. In the present case, MIML's view is that it is not legally responsible for any loss to the VBI Fund as a result of the investment in APGOF.

232. MIML says that any loss suffered by the VBI Fund was caused by the investment by APGOF in Torchlight, which MIML considers was never authorised by MIML. In that regard, in early 2013, APGOF sent a letter that invited investors to elect to focus on private equity investments and be redeemed in specie out of APGOF and become limited partners in Torchlight (or to otherwise remain in the "residual liquid stock portfolio" by remaining investors in APGOF). [91] MIML did not make that election and was informed the VBI Fund would not take up interests in Torchlight. [92] However, APGOF nevertheless exchanged all or substantially all of the assets it held for limited partnership interests in Torchlight and MIML was not informed of this and it was not disclosed in the APGOF fact sheets provided to MIML. [93] MIML considers this to have been improper having regard in particular to APGOF's investment objective, [94] APGOF's representations concerning the limits on any one investment [95] and the fact that MIML did not elect to take up interests in Torchlight. [96] In those circumstances, MIML's position is that the First, Second and Third Investments were merely the background to the loss, which was effectively caused by APGOF's improper acts, and only in the simplest "but for" sense can MIML's acts be said to have caused loss to the VBI Fund.

91. SOAF [118]

92. SOAF [121], [119(a)]

93. SOAF [123]

94. SOAF [44(d)(v),(vi)], [52(a)]

95. SOAF [42], [44(a)(iii)], [44(b)(xii)], [90(b)]

96. SOAF [121], [119(a)]

233. In any event, MIML has nonetheless caused arrangements to be made which make good any loss suffered by the VBI Fund. MIML has from Macquarie's funds made a payment to members which includes sums equivalent to the outstanding amount of the Full Redemption plus an additional amount calculated by reference to interest, and is also bearing the legal costs in respect of demands for payment made in relation to the Full Redemption and the conduct of the Artefact proceedings.

234. ASIC accepts that the arrangements made by MIML described above make good the full amount of the loss to the VBI Fund which ASIC asserts flows from MIML’s decisions to make the First Investment, the Second Investment and the Third Investment. ASIC does not accept that MIML bears no responsibility for losses to the VBI Fund flowing from the making of the First Investment, the Second Investment or the Third Investment and the other failures and breaches of duty referred to above. It was ASIC’s position that APGOF did not require MIML’s authority to invest in Torchlight interestsand MIML’s conduct is such as to make MIML liable to compensate the VBI Fund in full for all losses (because MIML ought never to have made the investment in APGOF). [97]

97. SOAF [283]

235. The parties submit that the Court can conclude that MIML’s conduct may have exposed the VBI Fund to the potential for significant loss, without resolving whether there was loss or not.

236. It is necessary, in the case of each contravention or group of contraventions, to evaluate the specific conduct involved in respect of each contravention to ascertain its relative seriousness, as well as considering any exacerbating and mitigating factors to be weighed in the balance in formulating a penalty in respect of that contravention or group of contraventions.

237. However, in the present case, given that the circumstances turn on the investment, status and divestment of APGOF shares, most of the factors to be considered are common to each contravention. These are set out below.

238. First, the starting point is an assessment of the relative seriousness of the conduct the subject of each of the contraventions. Considering the factors set out in ASIC v Adler (above) as to relative seriousness, it is clear that each of the contraventions is not in the most serious range of misconduct, as the contraventions did not involve deliberate impropriety, fraud or intention to deprive the VBI Fund permanently of funds, or deliberate falsification of accounts. The conduct was not dishonest but rather careless or negligent. Section 1317G, insofar as it deals with a contravention of s 601FC(5), has an amplitude which must accommodate the worst of contraventions of s 601FC(1), involving fraud or a failure to act honestly to the extent of deceit on the one hand, and the least serious departure from the requisite standard of care and diligence on the other. It is accepted that MIML’s conduct is not at the upper end of the scale.

239. However, the relevant conduct involved failures of duty by the RE of a managed investment scheme, responsible for protecting very large amounts of money in a substantial registered scheme with funds under management of approximately $148 million as at the time of the First Investment, with about 200 members, where the particular investment amounts involved were large (approx. $31 million). Notwithstanding the amount that may ultimately be recovered from APGOF (as to which see paragraph 158 above), the conduct involved serious potential for large losses, and occurred over a significant period. The contraventions involved conduct by MIML as the RE of the relevant Fund, in its capacity as a specialist manager and RE for reward of registered schemes, carrying on the business of a professional trustee, and where it held itself out as having securities investment management capabilities across a number of asset classes, including equities and multi-asset allocation solutions as part of that business, and as part of MIML conducting an “RE for hire” business. It is significant that MIML operates in the financial services area in which contraventions of civil penalty provisions have the capacity to cause great financial damage to many and these contraventions were not the result of an isolated failing on the part of a junior employee and involved middle and senior management of MIML.

240. Second, it is relevant that the conduct involved reliance by MIML on a professional investment manager. That is particularly relevant here, where the Business Agreement provided that van Eyk would recommend Underlying Managers to MIML, based upon certain criteria, with MIML retaining its overriding obligations to comply with its duties under the law, as a responsible entity and under the VBI Constitution, and the Business Agreement also provided that van Eyk would provide advice to MIML on the strategic and tactical asset allocation of the VBI Fund and target asset allocation between underlying managers of the VBI Fund. It is also relevant as the PDS and Information Booklet for the VBI Fund stated that van Eyk would "advise in … the selection" of Underlying Managers and elsewhere referred to Underlying Managers being selected by MIML (discussed above). However, although the role of van Eyk provides context to MIML's duties, MIML as RE was not entitled to rely on advice at the expense of its duty of care: see similarly, in the context of director's duties, Australian Securities and Investments Commission v Healey (2011) 196 FCR 291, [2011] FCA 717 at [162]. In the present circumstances, the very contravention involved MIML relying on van Eyk when, if it had exercised ordinary care, it would not have relied upon such advice without further enquiry: Daniels (Formerly Practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438 at 502-504 per Clarke and Sheller JJA (again in the context of director's duties).

241. Third, it is relevant that it has not been established that the conduct of MIML caused any loss to the members of the VBI Fund (this being an unresolved issue), and MIML has repaid the amount of the alleged loss to the VBI Fund in full. However, for the reasons set out above, and notwithstanding the amount that may ultimately be recovered from APGOF (in respect of which see paragraph 158 above), the Court can conclude that MIML’s conduct may have exposed the VBI Fund to the potential for significant loss, which is relevant to an assessment of the overall seriousness of the conduct and the contraventions. In respect of the liquidity contravention, the nature of that potential loss is also revealed in the prejudice to members who were left in the VBI Fund unable to redeem while others redeemed their investment in the VBI Fund at a time when the provisions in the VBI Constitution dealing with an absence of liquidity ought to have been implemented.

242. Fourth, while accepting that the amount prescribed in respect of each contravention, ranging from the most serious to the least serious type of conduct is intended to be within the range of zero to $200,000, nevertheless the following matters must be given due consideration:

(1)   primacy must be given to the principal requirement for the imposition of any penalty to be sufficient to meet the public interest in personal and general deterrence of similar future conduct;
(2) the maximum penalty of $200,000 pursuant to s 1317G of the Corporations Act was set in 1992 when what was then s 1317EA was inserted into the Corporations Law by the Corporate Law Reform Act 1992 (Cth), some 24 years ago. It has been observed that “the value of money erodes over time” and “in recent years the courts have been more concerned with the need for imposition of higher civil penalties to reflect community expectations” (Australian Securities and Investments Commission v Beekink (2007) 61 ACSR 205, [2007] FCAFC 7 at [118]-[119]). It has also been observed that the present day value of the maximum penalty may no longer reflect the seriousness with which Parliament intended contraventions to be treated when those penalties were first set: TPC v CSR Ltd at [52,154] per French J;
(3)   the penalty must be fixed with a view to ensuring that the penalty is not such as to be regarded by the offender as an acceptable cost of doing business: CFMEU v FWBII at [110];
(4)   large corporations can expect penalties in the upper levels of the range for which the law presently provides: TPC v CSR Ltd at [52,154] per French J. The size of the contravenor is relevant because the object of deterrence is unlikely to be achieved by the imposition of a small penalty on a large corporation: Australian Competition and Consumer Commission v Visy Paper Pty Ltd (No 2) (2005) 212 ALR 564, [2004] FCA 71 at [49] per Sackville J;
(5)   accordingly, a penalty must be imposed which will act as a reminder to the contravenor and the community of the consequences of the admitted contraventions, and this can be the most significant factor in determining penalty in particular cases: ACCC v Telstra at [204]. This can be so even where no loss is caused to the public: Singtel Optus v ACCC at [57].

243. MIML is a well-resourced, experienced, large public company and was at all material times (and still is) a subsidiary of Macquarie Bank Limited and Macquarie Group Limited; MIML made a net profits of approximately $21 million and $29 million for the years ended 30 June 2013 and 2014 respectively. [98] MIML is planning to cease its RE for hire business and has taken and is taking steps to implement that plan.

98. SOAF [284]

244. Fifth, this is the first instance in which conduct of this nature in this industry has been brought to the courts and thus it may be an important case for general deterrence.

245. Sixth, in relation to contrition and remorse, MIML has made arrangements such that the amount of the loss to the VBI Fund has been made up: ACCC v Woolworths Limited at [161]-[167] (Edelman J). MIML elected not to contest the proceedings and made admissions in respect of the declarations set out in the Originating Process, significantly reducing the costs of the proceedings as a result. It has agreed a penalty range. While the Court would take into account the documentary case set out in the SOAF and MIML’s potential exposure to a finding of liability and an adverse costs order of the proceedings in any event, even a party that contests part of otherwise agreed orders will receive mitigation for cooperation, because the test for cooperation does not require complete capitulation: ACCC v Woolworths at [161], [166]. MIML complied with all compulsory processes during ASIC’s investigation with respect to s 30 notices, s 912C directions and making employees available for s 19 examinations, but such compliance with compulsory processesought not greatly resonate in mitigation. It is relevant that MIML is proposing to discontinue its “RE for Hire” business but MIML remains a responsible entity for a significant number of schemes and awareness of duties and compliance obligations is relevant.

246. Seventh, ASIC has not sought to revoke or place conditions on MIML’s Australian Financial Services Licence (which might be equated with a disqualification order) and therefore MIML’s ability to continue to carry on its business as a responsible entity for a large number of schemes is unconstrained.

247. Eighth, in respect of the “course of conduct” principle, it is accepted that the contraventions involving the First Investment, the Second Investment and the Third Investment involve similar facts and failures by MIML across the three contraventions, and that at least the same failures are sufficient to establish the relevant contraventions in respect of each investment, per SOAF [113]. However, the First Investment also involved the additional failure set out at SOAF [114].In respect of the Third Investment, there was a further additional failure by MIML (SOAF [115]).

248. In relation to the seriousness of the contravention relating to the liquidity of the VBI Fund, the conduct gave rise to a disparity between those members who were able to withdraw from the VBI Fund at a particular redemption price as if the VBI Fund was liquid during the relevant period and those members who did not receive an offer to withdraw at a particular redemption price (which MIML was entitled to, but not required to, make, had the relevant VBI Constitution provisions been implemented), and thus were deprived of the knowledge of the status of the VBI Fund and any consequent right to withdraw during that period in accordance with the correct provisions of the VBI Constitution.

249. However, it should also be observed that the conduct related to the limited period of 15 July to 9 September 2013, being the date when a full redemption request of APGOF Shares was made.

250. Further, although MIML cannot reasonably have formed the view that the VBI Fund was liquid in the period 15 June 2013 to 9 September 2013, the knowledge of the facts leading to the conclusion that it was not liquid was not concentrated, at least initially, in a single senior repository and in that sense the conduct of MIML was not deliberate albeit serious.

251. The parties accept that the conduct of permitting individual redemptions on each of the days in the relevant period should be treated as a single contravention and the penalty assessed on that basis.

252. In relation to the seriousness of the contravention relating to the monitoring of the investment of the VBI Fund in APGOF Shares and failing to question the non-payment of the proceeds of the Full Redemption, the parties agree that the contravention is serious. [99] MIML is a professional trustee and its sole business is to act in that capacity.

99. SOAF [250]

253. The potential consequences of a failure to adequately monitor or question the merits of an investment, including where a professional investment manager has been retained, could be significant for a registered scheme of this size and nature. Over $30 million had been invested in a single fund, essentially controlled by one individual, Mr Boon.

254. It is not in dispute that MIML had systems in place to capture data and produce reports concerning the status of the VBI Fund, nor is it in dispute that the investment in APGOF was ultimately re-evaluated and exited, a decision that was made by van Eyk, as set out above. However, MIML did not adequately question the investment manager responsible for monitoring the investments about the monitoring of the investment or the failure to pay the redemption proceeds, or why they were not being paid, when it was within MIML’s power to do so. This situation prevailed, in one form or another, over an extended period from February 2013 to no later than July 2014.

255. The parties accept that the conduct, in respect of monitoring, should be treated as a single contravention albeit one that occurred over a significant period, and the penalty assessed on that basis.

256. Accordingly, having regard to the facts in the SOAF, it is submitted that an appropriate pecuniary penalty for each of the contraventions is in the order of:

(1)   $100,000 - $130,000 for the contravention in respect of the First Investment on the basis that this was the first significant failure which initiated the later chain of events, it involved serious failures of duty, though not the most serious of conduct ie dishonesty, and only a significant penalty will satisfy the necessary purpose of deterrence;
(2)   $10,000 - $20,000 for the contravention in respect of the Second Investment on the basis that it will be taken into account in the first contravention and may be seen as a continuation of the same course of conduct;
(3)   $80,000 - $100,000 for the contravention in respect of the Third Investment on the basis that the further facts known by MIML at that time should have triggered action by MIML, the failures involved a serious breach of duty;
(4) $70,000 - $90,000 for the contravention in respect of the liquidity of the Fund on the basis that it had real impact on investors in the VBI Fund and was itself a serious contravention of both s 601FC(1)(b) and s 601FC(1)(k)); and
(5)   $90,000 - $110,000 for the contravention in respect of the monitoring of the Fund on the basis of the significant time period involved in respect of that contravention but taking due account of the fact that MIML relied on external professional advice.

257. Accordingly, the parties submit that pecuniary penalties totalling $350,000 - $450,000 are appropriate.

258. It is submitted and the parties accept that that a total pecuniary penalty in the amount of $400,000 is within an appropriate range of penalty having regard to the relevant principles and application of those principles to the present facts, and is also appropriate having regard to totality.

Costs

259. The parties have agreed to an order that MIML pay a contribution to ASIC's costs of and incidental to the proceedings, fixed in the amount of $200,000, within 28 days of the Court's order.

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Endnotes

Decision last updated: 26 August 2016

Medium Neutral Citation:	In the matter of Macquarie Investment Management Limited [2016] NSWSC 1184
Hearing dates:	23 August 2016
Decision date:	23 August 2016
Jurisdiction:	Equity
Before:	Barrett AJA
Decision:	THE COURT DECLARES THAT: 1. Macquarie Investment Management Limited (MIML) as the responsible entity of the registered managed investment scheme known as the van Eyk Blueprint International Shares Fund (ASRN 103 447 481) (VBI Fund): (a) in exercising its powers and carrying out its duties with respect to the decision made on or about 6 July 2012 to invest in Artefact Partners Global Opportunity Fund Limited shares (APGOF Shares) and approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act; (b) in exercising its powers and carrying out its duties with respect to the decision made on or about 17 July 2012 to invest in APGOF Shares and the approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act; and (c) in exercising its powers and carrying out its duties with respect to the decision made on or about 30 October 2012 to invest in APGOF Shares and the approval or acceptance of Artefact Cayman or Artefact Partners as underlying manager, failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act. 2. During the period 15 June 2013 to 9 September 2013, MIML as responsible entity of the VBI Fund permitted members to redeem or withdraw units from the VBI Fund as if the VBI Fund was liquid when the VBI Fund was not liquid, in contravention of s 601FC(1)(b), s 601FC(1)(k) and s 601FC(5) of the Corporations Act. 3. MIML as responsible entity of the VBI Fund, in exercising its powers and carrying out its duties with respect to the investment in APGOF Shares, during the period from 18 February 2013 to no later than 21 July 2014 in not making adequate and timely enquiries of van Eyk in relation to van Eyk's monitoring of the VBI Fund's investment in APGOF Shares (including during the period 1 January 2014 to no later than 21 July 2014, in not making adequate and timely enquiries as to why the Full Redemption had not been paid and when it was likely to be paid), failed to exercise the degree of care and diligence that a reasonable person would exercise if they were in MIML's position, in contravention of s 601FC(1)(b) and s 601FC(5) of the Corporations Act. AND THE COURT ORDERS THAT: 4. Pursuant to section 1317G of the Corporations Act, the Defendant pay to the Commonwealth a pecuniary penalty of $400,000 within 28 days of the date of these orders. 5. The Defendant pay the Plaintiff’s costs of this proceeding in the agreed amount of $200,000 within 28 days of the date of these orders.
Catchwords:	CORPORATIONS – registered management investment scheme – civil penalty proceedings – contraventions admitted by defendant – statement of agreed facts and joint submissions on relief and penalty before the court – need for court nevertheless to exercise judgment – declarations and orders made in agreed form.
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Australian Securities & Investments Commission v Rich [2003] NSWSC 186; 44 ACSR 682 Australian Securities & Investments Commission v Rich [2004] NSWSC 836; 50 ACSR 500 Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 90 ALJR 113 Speight v Gaunt (1883) 9 App Cas 1
Category:	Principal judgment
Parties:	Plaintiff - Australian Securities and Investments Commission Defendant - Macquarie Investment Management Limited
Representation:	Counsel: Plaintiff - Mr JR Clarke SC with him Mr DG Healey Defendant - Mr N Hutley SC with him Ms RCA Higgins Solicitors: Plaintiff - Kim Turner of ASIC Defendant - Andrew Carter of Ashurst Australia
File Number(s):	2016/190085
Publication restriction:	Nil