Kim v Hodgson Faraday Pty Limited

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FEDERAL COURT OF AUSTRALIA

Kim v Hodgson Faraday Pty Limited [2022] FCA 1190  

File number: NSD 529 of 2016
Judgment of: JAGOT J
Date of judgment: 7 October 2022
Catchwords: REPRESENTATIVE PROCEEDINGS — misleading and deceptive conduct arising from sale of financial products overseas — where respondent sold dormant companies with Australian Financial Services licences — inferences of involvement — respondent not wilfully blind to misconduct — application dismissed  
Legislation:

Australian Securities and Investments Commission Act 2001 (Cth) ss 5(2), 12DA, 12GF(1), 12GH(2)

Corporations Act 2001 (Cth) s 79

Cases cited:

Australian Competition and Consumer Commission v Michigan Group Pty Ltd [2002] FCA 1439

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342; (2015) 235 FCR 181

Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1

Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968; (1998) 157 ALR 1

Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449

Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC 175; (2004) 160 FCR 1

The Zamora (No 2) [1921] 1 AC 801

Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661

Zervas v Burkitt (No 2) [2019] NSWCA 236

Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Number of paragraphs: 117
Date of hearing: 28–31 March, 6 April 2022  
Counsel for the Applicant: Mr J Mack and Mr T Bagley
Solicitor for the Applicant: Resurgam Law Corporation
Counsel for the Respondents: Mr A Macauley
Solicitor for the Respondents: Kazi Portolesi Lawyers

ORDERS

NSD 529 of 2016
BETWEEN:

KWANGHO KIM

Applicant

AND:

HODGSON FARADAY PTY LIMITED ACN 130 606 987

First Respondent

TMK INDEX LIMITED ACN 123 936 336

Second Respondent

YINGJIE WANG

Third Respondent

ORDER MADE BY:

JAGOT J

DATE OF ORDER:

7 OCTOBER 2022

THE COURT ORDERS THAT:

1.The proceeding be deemed to be discontinued against the first and second respondents on and from the date of this order.

2.The further amended originating application be dismissed.

3.The applicant pay the third respondent’s costs as agreed or taxed.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

JAGOT J:

1.                 OVERVIEW

  1. The applicant is a member of a group seeking damages from the third respondent (now the only remaining respondent), Mr Yingjie (Jay) Wang, under s 12GF(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).

  2. Mr Wang was the sole director of the former first respondent, now known as a TM Index Limited. The former second respondent, TMK Index Limited, was owned by the same holding company as that which owned TM Index. The applicant and group members are residents of South Korea. As a result of certain marketing and other information provided to the group…

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Details
Case
[2022] FCA 1190
Decision Date

CaseChat Overview and Summary

Kim, the applicant, filed a representative proceeding against Hodgson Faraday, the respondent, alleging misleading and deceptive conduct in the sale of financial products overseas. Specifically, the applicant claimed that the respondent had sold dormant companies that held Australian Financial Services licences, leading to inferences of involvement in fraudulent activities. The case was heard in the Federal Court of Australia, where the applicant sought to represent a class of individuals who had been misled by the respondent’s conduct.

The court was tasked with determining whether the respondent had engaged in misleading and deceptive conduct by selling the dormant companies and whether it was wilfully blind to the potential fraudulent activities of these entities. The key issue was whether the respondent had a duty to investigate the activities of the companies it sold, and if failing to do so amounted to misleading and deceptive conduct.

In dismissing the application, the court found that the respondent was not wilfully blind to any misconduct. The court reasoned that the sale of dormant companies, in and of itself, did not constitute misleading and deceptive conduct, especially when there was no evidence that the respondent was aware of, or should have been aware of, the fraudulent activities of these companies. The court concluded that the respondent had not engaged in misleading or deceptive conduct by selling the dormant companies, and therefore, the application was dismissed. The court also ordered that the proceeding be discontinued against the first and second respondents and that the applicant pay the third respondent’s costs as agreed or taxed.

Orders

Orders of the court

1. The proceeding be deemed to be discontinued against the first and second respondents on and from the date of this order.

2. The further amended originating application be dismissed.

3. The applicant pay the third respondent’s costs as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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