Kim v Hodgson Faraday Pty Limited

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.