FEDERAL COURT OF AUSTRALIA
Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170
ORDERS
VID 36 of 2022 BETWEEN: MAYFAIR WEALTH PARTNERS PTY LTD ACN 168 878 779
First Appellant
M101 HOLDINGS PTY LTD ACN 629 777 402
Second Appellant
ONLINE INVESTMENTS PTY LTD ACN 134 785 890
Third Appellant
AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
First Respondent
M101 NOMINEES PTY LTD (ACN 636 908 159)
Second Respondent
ORDER MADE BY:
JAGOT, O'BRYAN AND CHEESEMAN JJ
DATE OF ORDER:
10 OCTOBER 2022
THE COURT ORDERS THAT:
1.The appellants be granted leave to rely on the Amended Notice of Appeal.
2.The injunction made in paragraph 6 of the orders made on 21 January 2022 be set aside.
3.The appeal otherwise be dismissed.
4.The appellants pay the first respondent’s costs of the appeal as agreed or taxed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
1. BACKGROUND TO THE APPEAL
These reasons for judgment relate to the second appeal arising from judgments below concerning investment schemes involving a company formerly known as Mayfair Wealth Partners Pty Ltd and now known as Australian Income Solutions Pty Ltd (to be referred to in these reasons by its trading name during the relevant period, Mayfair Platinum), and other companies M101 Holdings Pty Ltd, M101 Nominees Pty Ltd, and Online Investments Pty Ltd trading as Mayfair 101 (Mayfair 101).
The investment schemes involved the issue of promissory notes. M101 Holdings was the issuer of the “M+ Fixed Income Notes” (M+ Notes). M101 Nominees was the issuer of the “M Core Fixed Income Notes” (Core Notes). Mayfair 101 marketed the M+ Notes and the Core Notes (together, the Mayfair products). James Mawhinney was the sole director of each of the companies.
The reasons for judgment concerning the first appeal were published as Mawhinney v Australian Securities and Investments Commission [2022] FCAFC 159 (the Mawhinney judgment). Although the two appeals were heard together, they involve appeals from different judgments and distinct issues.
These reasons for judgment concern the orders the primary judge made consequential on Australian Securities and Investments Commission v Mayfair Wealth Partners Pty Ltd (No 2) [2021] FCA 247 (J1, also the liability judgment) and Australian Securities and Investments Commission v Mayfair Wealth Partners Pty Ltd [2021] FCA 1630 (J2, also the penalty judgment).
The Mayfair parties (the defendants below, the appellants and second respondent in the appeal) did not appear at the hearing leading to J1. Consequential on J1, the primary judge made declarations as sought by the Australian Securities and Investments Commission (ASIC) to the effect that, in contravention of s 1041H(1) of the Corporations Act 2001 (Cth) (the Corporations Act) and ss 12DA(1), 12DB(1)(a) and 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) the Mayfair parties (or a number of them) represented to consumers that:
(1)the Mayfair products were comparable to, and of similar risk profile to, bank term deposits (the Bank Term Deposit Representations), when the Mayfair products expose investors to significantly higher risk than bank term deposits in various specified ways;
(2)on maturity of the Mayfair products, the principal would be repaid in full (Repayment Representations), when investors in the Mayfair products might not receive capital repayments at maturity because the defendants had the contractual right to elect to extend the time for repayment to investors for an indefinite period of time, including where the defendants did not have sufficient funds to repay investments at maturity, which right the defendants have in fact exercised;
(3)the Mayfair products were specifically designed for investors seeking certainty and confidence in their investments and therefore carried no risk of default (No Risk of Default Representations), when there was a risk that investors could lose some or all of their principal investment; and
(4)the Core Notes were fully secured financial products (Security Representations), when funds invested in Core Notes were: (a) lent to Eleuthera Group Pty Ltd and not secured by first-ranking, unencumbered asset security or on a dollar-for-dollar basis or at all, (b) used to pay deposits on properties prior to any security interest being registered, and (c) used to purchase assets that were not secured by first-ranking, unencumbered asset security.
The Mayfair parties appeared at the hearing leading to J2. Consequential on J2, the primary judge made orders on 21 January 2022 to the effect that:
(1)Mayfair Platinum pay a pecuniary penalty of $10,000,000 in respect of its contraventions of s 12DB of the ASIC Act;
(2)M101 Holdings pay a pecuniary penalty of $8,000,000 in respect of its contraventions of s 12DB of the ASIC Act;
(3)M101 Nominees pay a pecuniary penalty of $8,000,000 in respect of its contraventions of s 12DB of the ASIC Act, such penalty not to be enforced under s 553B(1) of the Corporations Act;
(4)Mayfair 101 pay a pecuniary penalty of $4,000,000 in respect of its contraventions of s 12DB of the ASIC Act;
(5)adverse publicity notices be published; and
(6)Mayfair Platinum, M101 Holdings, and Mayfair 101 be restrained from using certain specified phrases in any advertising, marketing or promotion.
The appellants (three of the defendants below), Mayfair Platinum, M101 Holdings and Mayfair 101, contend in this appeal that the primary judge erred on the basis of 36 grounds. The other defendant below, M101 Nominees, is now in liquidation and is the second respondent to the appeal. For convenience, the four defendant companies below are referred to as the appellants (or the Mayfair parties) except where it is necessary to distinguish between them.
The appeal proceeded on the basis of an Amended Notice of Appeal handed up in Court on the first day of the appeal hearing, a course which was not opposed by ASIC.
In common with our observations about the extensive grounds of appeal in the Mawhinney judgment, the numerous grounds raised in this appeal lack discrimination. They also fail to recognise the consequences of the forensic decision Mr Mawhinney made on behalf of the defendant companies below not to appear at the hearing leading to J1 and the importance of the principle of finality of litigation, one aspect of which is that a party is generally bound by its conduct below: Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491 at 497– 498, University of Wollongong v Metwally [No 2] [1985] HCA 28; (1985) 60 ALR 68 at 71. As explained below, having not appeared at the hearing which led to J1, it is not apparent how the appellants can establish that the primary judge erred in not making findings or drawing conclusions in J1 which were never put to the primary judge. The fundamental issues which the appellants never confront are that it is not an error to admit evidence to which no objection is taken (subject to a few exceptions where the evidence is prohibited from admission, which is not the case here). It is not an error to make reasonably open findings of fact when no-one argues the finding should not be made based on other potentially contradictory but contestable evidence. It is not an error to not weigh potentially competing characterisations of facts when no argument is made about the characterisation.
During the course of the hearing of the appeal these issues were raised with the appellants and, in that context, the appellants were asked why they had not applied to set aside the declarations consequential on J1 under r 39.05(a) of the Federal Court Rules 2011 (Cth) (the Federal Court Rules). Rule 39.05(a) provides that the Court may vary or set aside a judgment or order after it has been entered if “it was made in the absence of a party”. The appellants’ response was that the forensic decision had been made that an application under the rule was not available. It should also be noted that r 30.21 is to the same effect. It provides that if a trial proceeds in a party’s absence and during or at the conclusion of the trial an order is made, the party who was absent may apply to the Court for an order setting aside or varying the order and for the further conduct of the proceeding. The appellants made a forensic decision not to take these options.
It is difficult to escape the impression that Mr Mawhinney chose for the appellants not to apply to set aside the declarations made in their absence because that power is discretionary and it would have appeared unlikely that the Court would exercise a discretion in favour of the appellants when the most probable inference would have been that Mr Mawhinney decided they would be better served by not appearing at the liability hearing (see Polis v Zombor (No 5) [2022] FCA 122 at [43]–[44]). This reality, however, also exposes the problem on the appeal. An appeal to put arguments that could and should have been put to the primary judge, but which were not put due to a forensic decision seen to be to the advantage of the party at the time in not appearing at the hearing, cannot be used as a means to escape the principle of finality by attributing errors of the kind identified (that is, admitting evidence to which no objection is taken, making reasonably open findings of fact when no-one argues the finding should not be made based on other potentially contradictory but contestable evidence and not weighing potentially competing characterisations of facts when no argument is made about the characterisation).
The equivalent provision to r 30.21(1)(b)(i) in the Uniform Civil Procedure Rules2005 (NSW) (r 29.7) has been explained in these terms in In the matter of Anton Fabrications (NSW) Pty Ltd – Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186; (2011) 248 FLR 384 at [11]:
Turning then to the issue as to whether the application should be heard in the absence of Anton Fabrications, Rule 29.7 of the Uniform Civil Procedure Rules 2005 (NSW) applies when a trial is called on and any party is absent. In those circumstances the Court may proceed with the trial generally, so far as concerns any claim for relief in the proceedings, or may adjourn the trial. If it is the defendant who fails to appear, then the plaintiff may prove its claim so far as the burden of proof lies upon it and if it proves its claim is entitled to the relief claimed and such other relief as is consistent therewith (see discussion in Ritchie’s Uniform Civil Procedure (NSW), referring to Stone v Smith (1887) 35 Ch D 188 and Kingdon v Kirk (1887) 37 Ch D 141).
This is consistent with the reasoning of the High Court in Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279. By analogy in the present case, the appellants had not withdrawn their Response to ASIC’s Amended Concise Statement. Accordingly, it could not be taken by their failure to appear that they did not rely on their Response to ASIC’s Amended Concise Statement. ASIC therefore had to prove its entitlement to the claimed relief. However, the appellants remained (and remain) bound by their conduct in not objecting to evidence or making arguments about the weight that ought to be given to evidence. They could apply to set aside the declarations made in their absence. But they cannot assert error by the primary judge merely because their absence made it easier for ASIC to adduce evidence and prove its case.
This is not to say that no appeal may be brought against orders made in the absence of a party, even a party which has made a forensic decision not to appear at the hearing. Rather, the focus of these observations is that the need for adherence to the principle of finality is acute in respect of those appeal grounds which concern the primary judge’s alleged errors in admitting evidence or making factual findings based on the evidence below. It is not apparent how it can be said that the primary judge committed any error in this regard when the admissibility of the evidence and the weight which should be given to it was contestable and the appellants could and should have put their arguments as to both below.
Further, and relatedly, there is good reason for rr 39.05(a) and 30.21(1)(b)(i) to involve a discretionary decision, subject to appellate review only for an error of principle in the exercise of discretion in accordance with House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505–506. A party that has chosen not to appear can seek to have orders made against them in their absence set aside. But it is not apparent how such a party can succeed in alleging error by a primary judge on the basis of evidentiary issues which could and should have been tested below (in contrast, for example, to legal issues not depending on evidence open to different characterisation). To conclude that a primary judge has erred in those circumstances would be to set the hearing below at naught. It would also be to confer an unwarranted forensic advantage on the party that chose not to appear below. Had the same arguments about the evidence been put below, the other party could have made its own forensic decisions, including the seeking of an adjournment and the adducing of further evidence. As a matter of principle, this loss of that opportunity (whether it would have been taken or not) speaks against any departure from the requirement of finality in litigation. It also speaks strongly against any conclusion of error on the part of the primary judge in respect of contestable evidentiary questions.
Taking into account these matters and the reasons below, we have concluded that the appeal must be dismissed, other than in respect of the injunction made on 21 January 2022 which should be set aside as it is too broad and unworkable.
2. PRIMARY JUDGE’S REASONING
2.1 Statutory context
ASIC alleged that the appellants engaged in conduct that was misleading or deceptive or likely to mislead or deceive (in contravention of s 1041H(1) of the Corporations Act and/or s 12DA(1) of the ASIC Act) and/or made false or misleading representations (in contravention of s 12DB(1)(a) and (e) of the ASIC Act) by making the Bank Term Deposit Representations, Repayment Representations, No Risk of Default Representations, and the Security Representations: J1 [10].
The primary judge identified the relevant statutory provisions at J1 [24]–[33] including:
(1)Corporations Act, s 1041H(1): “a person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive”;
(2)Corporations Act, s 1041H(2)(a): “[t]he reference in [s 1041H(1)] to engaging in conduct in relation to a financial product includes (but is not limited to) … dealing in a financial product”. “Dealing” in a financial product includes “issuing a financial product” “whether engaged in as principal or agent”: Corporations Act, s 766C(1)(b);
(3)ASIC Act, s 12DA(1): “a person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive”;
(4)ASIC Act, s 12BAB(1)(b): “a person provides a financial service if they … deal in a financial product”. The meaning of “dealing in a financial product” includes “issuing a financial product”: ASIC Act, s 12BAB(7)(b);
(5)ASIC Act, ss 12BAA(1)(a) and (b): a “financial product” includes a “facility through which, or through the acquisition of which, a person … makes a financial investment” or “manages financial risk”; and
(6)ASIC Act, ss 12DB(1)(a) and (e): “a person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of financial services: (a) make a false or misleading representation that services are of a particular standard, quality, value or grade”; or “(e) make a false or misleading representation that services have sponsorship, approval, performance characteristics, uses or benefits …”.
The primary judge also identified that:
(1)“[s]ection 769C of the Corporations Act provides: [f]or the purposes of [Chapter 7], or of a proceeding under [Chapter 7], if … a person makes a representation with respect to any future matter (including the doing of, or refusing to do, any act)[,] and the person does not have reasonable grounds for making the representation[,] the representation is taken to be misleading”: J1 [42]; and
(2)sections 12BB(1) and (2) of the ASIC Act provide that “[i]f … a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act)[,] and the person does not have reasonable grounds for making the representation[,] the representation is taken, for the purposes of Subdivision D (sections 12DA to 12DN), to be misleading” and that “person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary”: J1 [40]–[41].
It is not suggested that the primary judge misstated any applicable principle in J1. Accordingly, the primary judge identified at J1 [35]–[36] that:
(1)“[a]lthough the [statutory language refers to] “misleading or deceptive conduct” and “false or misleading representations”, the cases establish that there is no material difference between these expressions in terms of their legal application”, quoting Australian Securities and Investments Commission v MLC Nominees Pty Ltd [2020] FCA 1306; (2020) 147 ACSR 266 at [47] per Yates J;
(2)“[t]he applicable principles concerning the statutory prohibition of misleading or deceptive conduct (and closely related prohibitions) in the Australian Consumer Law, the Corporations Act and the ASIC Act are well known. The central question is whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error (that is, to form an erroneous assumption or conclusion about some fact or matter)” quoting Australian Securities and Investments Commission v Dover Financial Advisers Pty Ltd [2019] FCA 1932; (2019) 140 ACSR 561 per O’Bryan J at [98]. Further, that O’Bryan J in Dover also summarised the authorities at [98] as follows:
(a)“conduct is likely to mislead or deceive if there is a real or not remote chance or possibility of it doing so”;
(b)“it is not necessary to prove an intention to mislead or deceive”;
(c)“it is unnecessary to prove that the conduct in question actually deceived or misled anyone… The question whether conduct is misleading or deceptive is objective and the Court must determine the question for itself”; and
(d)“it is not sufficient if the conduct merely causes confusion”;
(3)O’Bryan J in Dover continued in these terms at [99]:
… In assessing whether conduct is likely to mislead or deceive, the courts have distinguished between two broad categories of conduct, being conduct that is directed to the public generally or a section of the public, and conduct that is directed to an identified individual… In Google Inc v ACCC (2013) 249 CLR 435, French CJ and Crennan and Kiefel JJ (as her Honour then was) confirmed that, in assessing the effect of conduct on a class of persons such as consumers who may range from the gullible to the astute, the Court must consider whether the “ordinary” or “reasonable” members of that class would be misled or deceived (at [7]). In the case of conduct directed to an identified individual, it is unnecessary to approach the question at an abstract level; the Court is able to assess whether the conduct is likely to mislead or deceive in light of the objective circumstances, including the known characteristics of the individual concerned. However, in both cases, the relevant question is objective: whether the conduct has a sufficient tendency to induce error. Even in the case of an express representation to an identified individual, it is not necessary (for the purposes of establishing liability) to show that the individual was in fact misled.
2.2 Evidentiary context
The primary judge said this at J1 [79]–[81]:
As I have mentioned above, the trial was undefended. As a consequence, there was no challenge to the evidence tendered by ASIC. There was no evidence tendered by the Defendants.
I directed that ASIC file a document which identified the precise pages of the Court Book which ASIC tendered in evidence in support of the relief claimed. ASIC filed such a document on 9 February 2021. I have read and considered the specific Court Book references identified by ASIC as comprising the evidence on which ASIC relies in these proceedings.
As this matter proceeded before me undefended, and there was no challenge to the evidence tendered by ASIC, I do not propose to set out in detail the substance of all of the extensive evidence relied upon by ASIC. In the circumstances, that would serve no purpose. I have identified above the evidence to which I have had regard in making the findings set out below. It is sufficient to set out below some examples of the evidence relied on by ASIC.
These observations reflect the critical fact referred to above. The appellants decided not to appear at the hearing. There is no suggestion that this resulted from anything other than a forensic decision of Mr Mawhinney as to what he perceived at the time to be to the best advantage of the appellants.
The primary judge set out ASIC’s submissions. In that context, the primary judge noted that the statements and images relied upon by ASIC in its case were conveniently summarised as an annexure to ASIC’s amended submissions, at J1 [47]. His Honour reproduced that annexure as Annexure A to the reasons for judgment. A number of grounds of appeal are directed to Annexure A.
In considering ASIC’s case, the primary judge referred to examples of the marketing and related documents for the Mayfair products at J1 [82]–[109]. The primary judge also referred to the expert reports of Jason Tracy, chartered accountant, at J1 [68]–[72] and [110]–[129], as well as the report of the provisional liquidators of M101 Nominees at J1 [73] and [130]–[146].
The primary judge then made findings that each of the representations as ASIC had asserted had been made and were representations as to future matters taken to be misleading absent evidence to the contrary and otherwise were in fact misleading: J1 [148]–[176].
The primary judge then dealt with the issue of declaratory relief, making the declarations sought by ASIC at J1 [177]–[187].
The appellants appeared at the penalty hearing leading to J2.
3. EVIDENTIARY APPEAL GROUNDS – LIABILITY HEARING
The structure of the submissions for the appellants discloses the problem with their conception of the appeal. In their submissions they deal first with certain evidentiary appeal grounds (grounds 9, 10, 12, 13, 14 and 15).
To the extent that they relate to J1, grounds 9 and 10 are that the primary judge erred in admitting Mr Tracy’s reports into evidence (being the report dated 12 June 2020 and the supplementary report dated 12 August 2020).
As ASIC submitted, however, it is not an error by the primary judge to have admitted into evidence expert reports to which no objection was taken. The exclusionary rule in s 76 of the Evidence Act 1995 (Cth) (the Evidence Act) operates when objection is taken. This is because, as noted in Seltsam Pty Limited v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262 at [149] (cited with approval in Commissioner of Taxation v SNF (Australia) Pty Ltd [2011] FCAFC 74; (2011) 193 FCR 149 at [26]):
[i]n the ordinary course, the words “not admissible” in the Evidence Act, including in the opinion rule found in s70 to which s79 is an exception, means “not admissible over objection”, in accordance with the practice of the courts of which the Parliament was aware when it passed the Evidence Act. (See R v Reid (1999) NSWCCA 258 at [5]).
As noted, this is not a case where the appellants appeared but without legal representation below. It is a case where it must be inferred that the appellants deliberately decided not to appear before the primary judge for their own forensic advantage. Having done so and not objected to the admission of any evidence, the appellants cannot maintain that the primary judge erred by admitting into evidence an expert report which, in part or whole, did not comply with s 79 of the Evidence Act (“[i]f a person has specialised knowledge based on the person’s training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge”). The question whether an expert report complies with s 79 is usually contestable. Given that the appellants chose not to appear, the primary judge was not bound to scrutinise the expert evidence to ensure that every passage admitted strictly complied with s 79. It might be that in a case of manifest non-compliance, a primary judge in the same position might choose to exclude the evidence of their own motion. But this is not such a case and, even in such a case, the discretion of the primary judge would be broad in circumstances of deliberate non-appearance and resulting non-objection to expert evidence.
What certainly cannot be said is that the primary judge erred in admitting the evidence merely because the appellants belatedly see fit to put the kind of submissions about s 79 in this appeal which they could have put before the primary judge in the liability hearing. As noted, the effect of so doing is to clothe the almost inevitable consequence of their non-appearance with the mantle of “error” by the primary judge, when this cannot be so. It is also to deny ASIC the forensic opportunity it otherwise would have had below of seeking to supplement the evidence including by tendering documents, adducing oral evidence or, following an adjournment, tendering further reports or documents.
The same conclusion applies to ground 12 to the effect that the primary judge should have excluded the expert reports of Mr Tracy under s 135 of the Evidence Act at the liability hearing leading to J1 as they were based on incomplete information, contained provisional opinions only, were based on incorrect instructions, and were said to erroneously conclude that investor funds were not and are not generally supported by first-ranking, unencumbered asset security at 31 December 2019 and 20 March 2020. All of these propositions are contestable. If the appellants wanted to challenge the admission of the reports, they had to do so in the liability hearing before the primary judge leading to J1. “It is not, however, for the trial judge to raise and determine questions of admissibility”: Harrington-Smith on behalf of the Wongatha People v State of Western Australia (No 7) [2003] FCA 893; (2003) 130 FCR 424 at [13]. The appellants are bound by their lack of objection to the evidence before the primary judge.
Apart from this, the grounds are without substance. The reports were based on Mr Tracy’s expertise. The fact that some parts of the reports were based on incomplete or provisional information was acknowledged in the reports. The reports were admissible and it was a matter for the primary judge as to what weight to give to them. In circumstances where there was no objection to the reports and no argument about their weight, the primary judge was not bound to discount their weight.
The same conclusion applies to ground 13, which makes the equivalent complaint about the admission and use of the report of the provisional liquidators of M101 Nominees in the liability hearing leading to J1.
Grounds 14 and 15 suffer from the same problem. They are that the primary judge “erred by adopting conclusions of ultimate fact and of law from the Tracy Reports and the M101 PL Report [the provisional liquidators’ report about M101 Nominees] and by failing to reach his own conclusions of ultimate fact and of law” and erred in making various factual findings “based on opinions expressed in the Tracy Reports and the M101 PL Report and in not finding in respect of each such fact that [ASIC] had failed to prove it to the requisite standard under s 140 of the Evidence Act”.
However, in the circumstances discussed above, the various reports were properly in evidence. Further, the primary judge was entitled to give to those reports such weight as he saw fit in those same circumstances. The reports were not subject to the ultimate issue rule which was abolished by s 80 of the Evidence Act. The primary judge used the expert reports as he was entitled to do, amongst other evidence, to make his factual findings. So much is clear from J1 where the primary judge said at [147]:
I make the following findings in relation to the evidence tendered by ASIC and applying the principles relevant to misleading or deceptive conduct under the Corporations Act and the ASIC Act as stated in Dover at [98]–[101].
The evidence tendered by ASIC was not confined to the expert reports.
The notion that the primary judge strayed from the fundamental requirement that ASIC had to prove its case on the balance of probabilities in accordance with s 140 of the Evidence Act is untenable. Again, the appellants overlook the legal consequences of their decision not to appear at the hearing before the primary judge. The required approach described in Anton Fabrications and Banque Commerciale (see above) does not mean that a judge who is satisfied that a party has deliberately chosen not to appear must scrutinise the evidence adduced for the purpose of proof for any arguable ground of inadmissibility, conceive of arguments that might have been put as to the weight to be given to such evidence that the party might have made had they appeared, or of arguments that might have been put as to why certain findings should not be made. The judge in such a circumstance might choose to do so, but is under no duty to perform that function on the party’s behalf.
4. ISSUES AS TO THE LIABILITY JUDGMENT
4.1 Overview
Appeal grounds 1 to 8 also concern the liability judgment leading to J1. They are to the effect that the primary judge erred in finding the various representations were made and were misleading.
In large part, these grounds depend on the evidentiary challenges discussed and dismissed above. To that extent, these grounds also must fail. Moreover, there is much to be said for the view that in circumstances where the appellants had ample opportunity to seek orders from the primary judge setting aside or varying the declarations because they were made in the appellants’ absence but made a deliberate forensic decision not to do so (because, in all likelihood, no discretion to that effect would be exercised in the appellants’ favour), the appellants ought not to be able to characterise any aspect of the declarations as involving error by the primary judge.
In any event, the complaints are without merit. The evidence supported the making and falsity of the representations. Each relevant document has to be considered as a whole. Selecting some isolated statement or another as exculpatory, as the appellants do, is impermissible.
In the course of argument, the appellants advanced some sweeping assertions, including that ASIC had now abandoned the Repayment Representations and the No Risk of Default Representations or impermissibly sought to deviate from its pleaded case, and also that ASIC had now abandoned reliance on the summary of statements and images in Annexure A to J1. The former assertion is discussed and rejected below. The latter assertion is also incorrect. ASIC relied on Annexure A at trial (see J1 [47], [53], [59], [67], [148], [156], [167]). ASIC continues to do so. The examples provided by ASIC in its appeal submissions are from Annexure A. ASIC is not abandoning Annexure A at all. It is merely not itself burdening this Court with an obligation to deal with every entry in Annexure A. It was then for the appellants to point to some material in Annexure A or otherwise that would indicate error by the primary judge. The appellants have not done so.
As noted earlier, the primary judge reproduced examples of the evidence relied on by ASIC as to the representations made by the appellants (J1 [82]–[109]). The examples were drawn from five sources: the Mayfair Platinum website (operated by Mayfair Platinum, J1 [4]), the “Term Deposit Guide” website (operated by Mayfair 101, J1 [7]), the M+ Notes brochure, the Core Notes brochure and newspaper advertisements published by Mayfair Platinum. In respect of the examples referred to by the primary judge, the appellants submitted that:
The five examples yield 24 discrete statements taken from nine sources (the Mayfair Platinum website, the Term Deposit Guide website, the two brochures and five newspaper advertisements), plus a further five terms used in the sponsored link advertising (AdWords).
…
This leaves the 24 statements from the nine sources identified in the first four examples identified by ASIC ... It is unclear, however, whether ASIC’s case is confined to those 24 statements from those nine sources. ASIC also says it relies on all the evidence it identified at trial. In its submissions in respect of particular representations, ASIC relies on one further source and six further statements which are not included in the four examples.
Given that this is a case where representations are not said to be express but rather to be implied and conveyed by a number of different statements drawn from different sources, it is essential that the totality of the evidence relied on as conveying those representations be identified with clarity and precision. At least Annexure A had the virtue of identifying all the evidence ASIC relied on at trial for the making of the alleged representations. On appeal it is unclear what that evidence is.
We reject the submission. It involves a combination of misattributed action and wrong consequence. As noted, ASIC relied on Annexure A and continues to do so. The primary judge plainly considered all of the statements in Annexure A in their actual context in the material. As will be explained, the appellants have not demonstrated any error in the primary judge’s reasoning or conclusions.
In particular, we do not accept that the primary judge failed to consider the statements on which ASIC relied in context. The primary judge did not accept ASIC’s case “uncritically”, overlook evidentiary shortcomings, or reach conclusions inconsistent with the evidence. The primary judge did find that the evidence established that the alleged misrepresentations were made separately and together by the statements on which ASIC relied as set out in Annexure A to his reasons: J1 [148], [156], [161], [167]. It is also not the case that the findings as to the separate conveyance of the misrepresentations are untenable. ASIC’s case is not to be understood as being that each statement in a single document would have been considered out of its context and, without any context, as conveying the relevant misrepresentation. That is not what the primary judge’s findings at J1 [148], [156], [161], [167] mean. The “separate and together” description operates on a document-by-document basis, not a statement-by-statement basis. So much is apparent from the presentation of the statements on a document-by-document basis in Annexure A to J1.
It may be accepted that the primary judge’s reasons do not isolate each statement found to separately convey the relevant misrepresentation. But that is not the essence of the appellants’ complaint. In any event, a number of the statements as they appear in a single document which would be read in the context of the document as a whole do separately convey the relevant misrepresentations. For example only, each of the primary brochures for the M+ Notes and the Core Notes respectively convey each of the misrepresentations relevant to that product (that is, all four misrepresentations for the Core Notes but not the Security Representations for the M+ Notes). Accordingly, there is no error disclosed in the primary judge’s findings in this regard.
Insofar as the concept of the marketing material “together” conveying the misrepresentations is concerned, and as discussed below, the primary judge’s reasons expose the documents and the statements in them which led his Honour to his findings. It is not open to the appellants to seek to run an inadequate reasons ground in respect of J1 in circumstances where that issue is not raised in any of their 36 grounds with numerous sub-grounds.
In determining whether the contraventions occurred, the primary judge was not bound to consider whether the statements in Annexure A were made as a part of one or more courses of conduct. In any event, as we have said, each of the primary brochures for the M+ Notes and the Core Notes respectively convey each of the misrepresentations relevant to the respective products. The appellants’ submissions that: (a) “the statements contained in the brochure for the M+ Notes were not made in the same course of conduct as the statements in the Core Notes brochure. Statements from the two brochures therefore cannot be combined to create the impression of one of the alleged representations”, and (b) “for any combination of statements to create the impression of one of the alleged representations, it must be established that they were all made to at least one person. If some were made to some people and others to other people, they cannot be combined to create the impression of one of the alleged representations” are beside the point. It is obvious that the M+ Notes brochure and the Core Notes brochure do not need to be combined to result in the misrepresentations. Had the primary judge committed that error, he would not have dealt separately with the Security Representations which apply only to the Core Notes.
The primary judge did not fail to identify the target audience, as alleged by the appellants. That contention is irreconcilable with the primary judge’s correct identification of the applicable principles including at J1 [36], in particular the reference to Dover and its description of the persons or class of persons to whom the representations are conveyed. It was not in dispute before the primary judge that the obvious target audience, as asserted by ASIC, was the class of potential investors in the products (see J1 [173]). As discussed below, the appellants’ reliance on the operation of ss 708(8) and 761G(4) of the Corporations Act to support the argument that the target audience of the representations were “experienced investors” and “sophisticated investors” (in the sense of being financially sophisticated) is misplaced. The primary judge’s references to the misrepresentations being made to “consumers” does not mean that he failed to recognise that the representations were directed to the class of potential investors. It merely recognises that the members of this class are consumers.
The appellants’ unrealistic approach to appellate review is disclosed, for example, in their criticism of the primary judge for saying at J1 [162] that “the use by the Defendants in the marketing material for the Mayfair Products of the words “certainty” and “confidence” is likely to have conveyed to at least some consumers that their principal investment would definitely be repaid in full at maturity and that the investments carried no risk of default”. The primary judge was not deviating from the concept of the ordinary and reasonable class member. He had already expressly accepted that proposition at J1 [37] by adopting the applicable principles as summarised in Dover. The primary judge acknowledged ASIC’s submission to the effect that the “relevant class may cover a wide range of people whose personal capacity, knowledge and experience may vary quite significantly”: J1 [39]. The appellants’ attribution to his Honour of the application of a test of the “gullible and credulous consumer” is untenable.
The fact that the primary brochures for the M+ Notes and the Core Notes respectively refer to the relevant promissory deed and include a declaration section with 11 dot points including “[t]he Applicant agrees to the terms of, and to be bound by, the Note Deed [and the Security Trust Deed]” (only the Core Notes brochure refers to the Security Trust Deed), and that these documents were available to and executed by investors, does not assist the appellants. Both are complex legal documents. The problem is that no ordinary and reasonable member of the class of potential investors could have expected that the products, as marketed, would be subject to a provision in the terms of cl 5.6 of the Secured Promissory Note Deed Poll as set out by the primary judge at J1 [157] (that is, that the issuer would have such a wide discretion to defer repayment of the principal).
It is also not material that the investors did not give evidence that they were induced to make the investments by reason of the pleaded misrepresentations. As summarised in Dover (at [103], [105]):
[103]The defendants’ second and third arguments about the purported difference in approach in cases involving communications to a group of persons and communications to individuals is based on a misunderstanding of what was decided in Campomar [Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45] and related cases….the central issue raised by the statutory prohibitions is whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error. Conduct is misleading or deceptive or likely to mislead or deceive if it has that tendency; it is not necessary to show that the conduct has had that effect (that is, that a person has in fact been misled). Third, Campomar explains that proof of that tendency will often differ depending on whether the conduct involves a communication to a group of persons or a communication to individuals. The High Court referred with approval (at [100]) to the observations of Deane and Fitzgerald JJ in Taco Bell [Taco Company of Australia Inc v Taco Bell Pty Ltd [1982] FCA 170; (1982) 42 ALR 177] (at 202) that, in cases involving express untrue representations made to identified individuals, the process of deciding whether the conduct was misleading or deceptive may be direct or uncomplicated. It was not suggested, however, that it was necessary to show that the individual concerned was actually misled. The High Court contrasted such cases with cases in which a representation is made to a wider group of persons, including the public or a section of it. The Court observed (at [101]) that in such cases, the sufficiency of the nexus between the conduct and the likelihood of misconception and error must be approached at a level of abstraction. The contrast drawn by the Court was not to the effect that, in the former case, it was necessary to prove that individuals were misled whereas, in the latter case, that was unnecessary. In both cases, it was only necessary to prove the sufficiency of the tendency of the conduct to lead people into error. However, proof of that tendency in the case of communications to a group is necessarily undertaken at a level of abstraction that is not present in the case of communications to an individual.
…
[105]… The misleading or deceptive conduct was complete, and the false or misleading representation was made, when Dover, through its authorised representatives, communicated the Client Protection Policy to clients in a manner that would be expected to bring the document to their attention: cf Thompson v Riley McKay Pty Ltd (No 2) (1980) 29 ALR 267 at 273 per Franki J and 276 per Deane J. In that case, which concerned a criminal prosecution for a contravention of s 53(a) of the Trade Practices Act 1974 (Cth) (the predecessor of s 29(1)(a) of the Australian Consumer Law and s 12DA(1) of the ASIC Act), Deane J observed (at 276):
It is implicit in the ordinary use of the word “represent” that there be an intended representee, to whom the relevant representation is directed. That intended representee may be an identified person, as in the case of a representation made to a particular person in a letter, or unidentified, as is commonly the case with a representation made in an advertisement to be disseminated by the mass media. There is not, however, implicit in the word “represent” any requirement that the representation actually reach, or be understood by, the intended representee. The act of representing is complete once the subject matter is irrevocably set forth or disseminated upon the course which is intended to lead to the intended representee or representees.
We also do not accept a proposition the appellants made repeatedly that the judgment is “irregular” because it does not identify who committed the contraventions. The judgment identifies that all defendants below made the Bank Term Deposit Representations, the Repayment Representations, and the No Risk of Default Representations, but only three (Mayfair Platinum, M101 Nominees, and Mayfair 101) made the Security Representations. The appellants are right that the judgment and declarations reflect a conclusion of joint liability, but this goes nowhere. Based on various examples of alleged misattribution of responsibility by the primary judge to the wrong defendant below, the appellants submitted, for example, that:
His Honour made no findings of involvement by some defendants in the contraventions of others and ASIC made no case to that effect. By failing to consider which defendant made which alleged representations and by merely lumping them all in together and making them jointly liable for all the representations (except for M101 Holdings and the Security Representations), his Honour also failed to engage in the necessary evaluation of the evidence required for determining whether the defendants made any of the alleged representations.
It is correct that ASIC’s case did not depend on the involvement of any one party in the conduct of another in the sense described in Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661. It is not the case, however, that the primary judge simply “lumped” all defendants below together. As we have said, this is inconsistent with the exclusion of M101 Holdings from liability for the Security Representations. In circumstances where the appellants chose not to appear below, the primary judge did not err in finding that the defendants, in effect, were jointly engaged in the promotion of the Mayfair products. This finding was proper in circumstances where the Mayfair products were marketed as products of the Mayfair Group.
We also do not accept that J1 is inconsistent in respect of whether the misrepresentations were singular or plural. The misrepresentations were conveyed multiple times by making the marketing material available to the class of potential investors. And as the appellants conceded (properly), “the declarations of contraventions state all the representations in the plural and so it must be accepted that his Honour found that the representations were made multiple times”.
The fact that the primary judge did not, because he could not, determine the number of contraventions is immaterial. As further discussed below, if the number of contraventions can be identified then any declaration should do so. If, however, the number of contraventions cannot practically be identified, then a declaration is not “irregular” or invalid for that reason. Neither proposition supports the conclusion that the primary judge failed properly to evaluate the evidence of the contravening conduct. Given the repetitiveness of aspects of the appellants’ submissions, we must reiterate in respect of these complaints also that it is not open to the appellants to seek to run an inadequate reasons ground in respect of J1 in circumstances where that issue is not raised in any of their 36 grounds with numerous sub-grounds.
4.2 Bank Term Deposit Representations (grounds 1, 2 and 17)
The Bank Term Deposit Representations were not that the M+ Notes and Core Notes were the same as bank term deposits. The Bank Term Deposit Representations identified in the Amended Concise Statement at [9] were that “the defendants, in the course of trade or commerce, made representations to consumers that the Mayfair Products were comparable to, and of similar risk profile to, bank term deposits”.
The primary judge had regard to these facts, amongst others at J1 [82]–[104].
First, the Mayfair Platinum website said:
Cash and term deposit alternatives
…
Qualified investors can access term-based investment options starting from AU$100,000 and ranging from 3 months to 5 years, with the option of monthly interest distributions.
It also said at a later point in time:
Gain exclusive access to
• High yield term deposit alternatives
…
The website included tables for each of the Core Notes and the M+ Notes which were headed “Current Rates” and which set out investment terms between three and 60 months and the applicable “Fixed Interest Rate (P.A)”
In respect of the M+ Notes product, the Mayfair Platinum website said:
Take the first step towards boosting your income-generating potential for your idle money.
Investing in our M+ [Notes] product is a smart and effective way of earning competitive rates of return whilst official interest rates are at record-lows.
Low interest rates have resulted in much-needed innovation within the financial services industry to fill the gaps left by the banks, both in terms of investment products and also deployment of capital. Non-bank alternatives have created wide opportunities for investors and companies.
In respect of the Core Notes product, the Mayfair Platinum website said:
Activate your idle money and earn monthly distributions from a secured, asset backed, term-based investment product.
We invite you to invest in [the Core Notes], a secured, asset backed term-based investment product offered by a forward-thinking group that is working to drive positive change in the financial services and investment industry.
Low interest rates have resulted in much-needed innovation within the financial services industry to fill the gaps left by the banks, both in terms of investment products and also deployment of capital. Non-bank alternatives have created wide opportunities for investors and companies.
As noted by the primary judge at J1 [88], the pages on the Mayfair Platinum website dedicated to the M+ and Core Notes products contained an “Income Calculator”. Users could insert the proposed “investment amount” per annum and the proposed “investment term” and, depending on the relevant interest rate applied, the “Income Calculator” calculated the purported “monthly distribution” and “total interest earnt” over the term.
The M+ Notes brochure said the product was a “term-based investment opportunity”. Statements in the brochure included (emphasis in the original):
Tired of term deposits?
Congratulations on taking the first step towards boosting the income-generating potential of your idle money.
Investing in [the M+ Notes] is a smart and effective way of earning competitive rates of return whilst official interest rates are at record-lows.
We invite you to invest in [the M+ Notes] and be part of a forward-thinking group that is driving positive change in the financial services and investment industry.
The M+ Notes brochure had a section titled “Frequently Asked Questions” which included:
Is Mayfair Platinum regulated?
Yes. Mayfair Wealth Partners Pty Ltd (t/a Mayfair Platinum) is a corporate authorised representative (#00176207) of Quattro Capital Pty Ltd, which holds an Australian Financial Services Licence (#334653).
How can you pay fixed interest rates higher than the banks?
The interest rates we offer our investors are facilitated by the Mayfair 101 group’s capital management strategy. The group carefully selects opportunities to invest in that provide strong yields, capital growth, and refinancing opportunities that enable us to support principle [sic] and interest repayments to our investors.
Is the Issuer a bank?
No. However, many M+ Fixed Income investors have chosen to move away from the banks due to historically low interest rates on term deposits and savings accounts. We operate by accessing capital from third parties (our investors), paying our investors for access to that capital, and utilising that capital to grow the Mayfair 101 group.
Are my returns tied to the Issuer’s investment performance?
No. The Issuer is obligated to pay the quoted rates of interest and principal on the M+ Fixed Income product, regardless of the performance of its investments.
…
What are the risks?
Investors should be mindful that, like all investments, there are risks associated with investing in our M+ Fixed Income product. Risks to take into consideration include general investment, lending, liquidity, interest rate, cyber, related party transactions and currency risks.
…
Can I withdraw my money out early if I need to?
Yes, although redemptions are subject to liquidity and other applicable terms. Please note this may be subject to a 1.5% early withdrawal and liquidity fee. Please provide 30 days’ notice in writing for amounts up to $1m. For amounts above $1m simply email your Client Relationship Manager and they will advise a repayment schedule within 2 business days.
Is the M+ Fixed Income product covered by the Australian Government’s Financial Claims Scheme (FCS)?
The Australian Government’s Financial Claims Scheme (FCS) (or ‘Government Guarantee’) doesn’t cover investments made in our M+ Fixed Income product. The Financial Claims Scheme has a limit of $250,000 per account holder per bank, and the banks have a bailout limit of just $20b per bank. Be mindful that bank investments above $250,000 aren’t covered by the Financial Claims Scheme, which is a reason why M+ Fixed Income is worth considering for larger investment amounts.
The Core Notes brochure described the Core Notes as a “secured, asset-backed, term-based investment opportunity”.
The Core Notes brochure included this (emphasis in the original):
Tired of term deposits?
Activate your idle money and earn monthly distributions from a secured, asset-backed, term-based investment product.
Investing in our M Core Fixed Income product is a smart and effective way of earning competitive rates of return and monthly income whilst interest rates are at record lows. We invite you to invest in M Core Fixed Income, a secured, asset- backed term-based investment product offered by a forward-thinking group that is working to drive positive change in the financial services and investment industry.
The Core Notes brochure had a section titled “Frequently Asked Questions” which included:
How is the M Core Fixed Income product secured?
The M Core Fixed Income product is secured by a pool of assets in respect of which first-ranking, registered security interests have been granted. The assets are otherwise unencumbered, and are made up of Australian real estate, assets held by Mayfair 101 Group entities, and cash from investors held in the Issuer’s dedicated M Core Fixed Income bank account. Such cash will only be used where there is dollar-for-dollar secured asset support.
A third party security trustee, PAG Holdings Australia Pty Ltd, (ACN 636 870 963, AFSL Auth. Rep. No. 001278649) of Perpetuity Capital Pty Ltd (ABN 60 149 630 973, AFSL 405364), as trustee of the Mayfair Platinum Secured Notes Security Trust, administers the secured pool of collateral assets on behalf of investors, and the assets are revalued at least yearly to ensure dollar-for-dollar secured asset support for each dollar of M Core Fixed Income notes.
…
Is Mayfair Platinum regulated?
Yes. Mayfair Wealth Partners Pty Ltd (t/a Mayfair Platinum) is a corporate authorised representative (#00176207) of Quattro Capital Pty Ltd, which holds an Australian Financial Services Licence (#334653).
How can you pay fixed interest rates higher than the banks?
The interest rates we offer our investors are facilitated by the Mayfair 101 group’s capital management strategy. The group carefully selects opportunities to invest in that provide strong yields, capital growth, and refinancing opportunities that enable us to support principle [sic] and interest repayments to our investors.
Are my returns tied to the Issuer’s investment performance?
No. The Issuer is obligated to pay the quoted rates of interest and principal on the M Core Fixed Income product, regardless of the performance of its investments.
Is the Issuer a bank?
No. However, many M Core Fixed Income investors have chosen to move away from the banks due to historically low interest rates on term deposits and savings accounts. We operate by accessing capital from third parties (our investors), paying our investors for access to that capital, and utilising that capital to grow the Mayfair 101 group.
…
What are the risks?
Investors should be mindful that, like all investments, there are risks associated with investing in our M Core Fixed Income product. Risks to take into consideration include general investment, lending, liquidity, asset, interest rate, cyber, related party transactions and currency risks.
…
Can I withdraw my money out early if I need to?
Yes, although redemptions are subject to liquidity and other applicable terms. Please note this may be subject to a 1.5% early withdrawal and liquidity fee. Please provide 30 days’ notice in writing for amounts up to A$1m. For amounts above A$1m simply email your Client Relationship Manager and they will advise a repayment schedule within 2 business days.
Is the M Core Fixed Income product covered by the Australian Government’s Financial Claims Scheme (FCS)?
The Australian Government’s Financial Claims Scheme (FCS) (or ‘Government Guarantee’) doesn’t cover investments made in our M Core Fixed Income product. The Financial Claims Scheme has a limit of A$250k for each account holder per bank, and the banks have a bailout limit of just A$20b per bank. Be mindful that bank investments above A$250k aren’t covered by the Financial Claims Scheme, which is a reason why M Core Fixed Income is worth considering for larger investment amounts.
There were a number of advertisements published about the Core Notes. These included such statements as:
(1)“5.45% P.A 12 MONTHS FIXED RATE”;
(2)“a new investment product that caters to investors seeking a strong yield from a secured investment product. With interest rates at record lows and investor sentiment shifting away from traditional financial institutions towards non-bank fixed income providers, Mayfair Platinum is delighted to make this new product available to Australian wholesale investors (not available to retail investors)”; and
(3)“M Core Fixed Income provides a fixed monthly income at competitive interest rates backed by dollar-for-dollar security over assets held by the Mayfair 101 Group of companies”.
There was a “Term Deposit Guide” website operated by Mayfair 101 ( which said (emphasis in original):
If you are about to invest $100k-$5m in a term deposit and want more than 3% p.a....talk to us first!
Join the hundreds of savvy Aussie investors that were tired of earning low interest rates on their term deposits, and have made the switch to boost their investment returns and upgrade their lifestyle.
…
Find out where Australian investors are parking their idle money to beat inflation and earn regular monthly income. Our dedicated Australia-based team has assisted hundreds of Australian investors, retirees, companies, individuals and more, to earn a better yield on their money. See if you qualify today!
The meaning conveyed when a product is marketed as an “alternative” to some other product may be that the products are different (eg, Coke and Fanta) or that they are similar (eg, Coke and Pepsi). An “alternative to” a bank term deposit might convey that the product is nothing like a bank term deposit or that the product is similar to a bank term deposit in critical respects. Context is all important.
With respect to context, the primary judge also had regard to the fact the Mayfair parties engaged in what is known as “sponsored link advertising” (at J1 [105]–[109]). This sponsored link internet advertising was conducted via the Google “AdWords” program and Bing “Ads” program, and included the use of “meta-title tags” such as “term deposit rates – best term deposit options” and “adwords” for sponsored searches, including “bank deposits” and “term deposits”. His Honour found (at J1 [109]) that the Mayfair parties’ marketing strategy was addressed to persons searching the internet for term deposit products in order to divert them to the Mayfair parties’ websites.
Contrary to the appellants’ submissions, the “whole thrust” of the brochures and marketing material summarised above was not to emphasise the differences between the Mayfair products and bank term deposits. The higher interest rates offered did not convey a riskier product. To the contrary, the message conveyed was that the products offered a higher interest rate than bank term deposits with a similar risk as bank term deposits. The documents identified the products as “term-based investment options” offering “monthly interest payments”. The marketing is directed at people who are “tired” of earning minimal returns from their term deposits with banks. The message was that the products are a non-bank offered alternative to a bank term deposit. The differentiating feature conveyed is not the higher risk profile, but the higher interest rates. This message was reinforced by the statement that the “[i]ssuer is obligated to pay the quoted rates of interest and principal on the [M+/M Core] Fixed Income product, regardless of the performance of its investments”. Even the question and answer “[h]ow can you pay fixed interest rates higher than the banks? The interest rates we offer our investors are facilitated by the Mayfair 101 group’s capital management strategy…” reinforce the message of a similar risk to a bank term deposit. The answer was not, for example, that the products carried more risk than a term deposit in terms of payment of interest and repayment of principal, but that the strategy was different. The same applies to the question and answer “[i]s the Issuer a bank? No. However, many M+ Fixed Income investors have chosen to move away from the banks due to historically low interest rates on term deposits and savings accounts”. The message is that the relevant difference is the interest rates able to be paid, not the risks of the products. The anodyne answers such as “[i]nvestors should be mindful that, like all investments, there are risks associated with investing in our M+ Fixed Income product” and “[y]es, although [early] redemptions are subject to liquidity and other applicable terms” do nothing to convey that the products involve a fundamentally different risk profile from a bank term deposit.
Accordingly, and contrary to the appellants’ submissions, each document as a whole did convey the impression that the Mayfair products were comparable to, and of similar risk profile to, bank term deposits. The fact that the documents disclose that the Mayfair products are not bank term deposits may be accepted, but is beside the point. In conveying that the Mayfair products were an alternative to bank term deposits, the documents also conveyed that the products were comparable to, and of similar risk profile to, bank term deposits. That is, in the overall context, the documents were not saying that these were products not comparable to and not offering a similar risk profile to bank term deposits. The whole point of the “alternative” message was to convey that the products were comparable to, and of similar risk profile to, bank term deposits, and because they were not bank term deposits they could offer higher interest rates than currently offered by bank term deposits.
It is appropriate to address ground 17, other than ground 17(d), in conjunction with grounds 1 to 8. Ground 17 is as follows:
In finding that the alleged representations were false, the learned judge erred in:
(a) failing to consider the evidence that the Mayfair Products were marketed exclusively to “wholesale clients” within the meaning of s 761G of the Corporations Act;
(b) failing to consider the evidence that the investors who gave evidence were all “wholesale clients” within the meaning of s 761G of the Corporations Act and most were wealthy and experienced investors;
(c) failing to consider that none of the investors who gave evidence for the first respondent said they were induced to invest in the Mayfair Products by any of the alleged representations;
…
(e) failing to consider that the material which promoted the Mayfair Products made clear the products were only available for subscription by wholesale investors, contained warnings about the risks of the products, said the issuer was not a bank and that the products were not covered by the Financial Claims Scheme (the Federal Government guarantee for bank deposits);
(f) failing to consider objectively and fairly the true nature of the representations and the context in which they were made.
Each of those stated grounds should be rejected for the following reasons.
First and foremost, each of the grounds is a contention that the primary judge failed to consider certain matters. As explained earlier, in circumstances where the appellants elected not to participate in the trial, and for that reason no submissions were made to the primary judge in the terms now set out in the above grounds, there can be no error in the primary judge failing to consider the matters stated.
Second, it should not be inferred that the primary judge was unaware that the Mayfair products were only available to persons who qualify as “wholesale investors”, using the language of the Mayfair brochures and marketing material. That was stated expressly in that material and referred to by the primary judge in his reasons. Further, the primary judge referred expressly to ASIC’s submission that the Mayfair products were marketed to wholesale but inexperienced investors, at least a substantial subset of whom were unlikely to understand the significant risk associated with the Mayfair products (J1 [22]).
Third, the appellants’ reliance on the fact that the Mayfair products were only available to persons who qualify as “wholesale investors” is misplaced. It can be accepted that persons who qualify as “wholesale investors”, as defined in respect of the Mayfair products, would meet the definition of “sophisticated investors” in s 708 of the Corporations Act and the definition of “wholesale clients” in s 761G of the Corporations Act. As such, certain provisions of the fundraising law in Ch 6D of the Corporations Act, and certain provisions of the financial services law in Ch 7 of the Corporations Act, were inapplicable to the Mayfair products. However, neither s 1041H(1) of the Corporations Act nor ss 12DA(1) and 12DB(1)(a) and (e) of the ASIC Act were rendered inapplicable.
The appellants repeatedly elide the concept of a “wholesale investor” with a “sophisticated investor” in an ordinary sense of a financially sophisticated person. The elision is invalid. The definition of “wholesale investor” used in respect of the Mayfair products is only that the person:
(1)wishes to invest $500,000 or more; or
(2)has net assets of $2.5 million or above; or
(3)has a gross income of $250,000 per annum or above for the last two years.
It cannot be assumed that all people who meet one of those criteria have knowledge or experience in respect of financial products. Nor can it be assumed that that class of person did not include numerous persons who were dependent on the accuracy of the marketing material the appellants chose to promulgate.
Moreover, on the unchallenged evidence before the primary judge, investors in the Mayfair products included:
(1)a retired medical practitioner with a self-managed superannuation fund who managed most of his money and had 30 years’ experience investing in the share market relying, however, on expert advice (with the exception of a five year period where he personally managed his share portfolio) and did not consider himself a sophisticated investor as his goal was to preserve capital as much as possible;
(2)an engineer with a self-managed superannuation fund managed by a third party adviser who invests some part of his and his wife’s personal funds as a hobby; and
(3)an information officer at a university who won a large amount of money in a lottery and had no investment experience apart from acquiring blue chip shares after the lottery win and whose investment experience was otherwise limited to properties and a bank term deposit.
As to the appellants’ contention that the representations must be considered in the context in which they were made, the relevant context included the fact that historically low interest rates were being offered on bank term deposits. The interest rates being offered in respect of the Mayfair products were comparable to what an investor could previously obtain from a bank term deposit. The thrust of the marketing was that the Mayfair products offered investors the level of (higher) interest rates they had historically been able to obtain on bank term deposits, but could no longer, and that was because of Mayfair’s unique non-bank investment strategy, not because of a fundamentally different risk profile of the products. As ASIC submitted, the:
marketing strategy for the Notes as demonstrated by the examples referred to above was to play on the perception that bank term deposit rates were too low even given the low risk profile. This was achieved by conveying that higher returns could be had without taking on a materially higher level of risk.
The appellants’ proposition that, in assessing the characteristics of the ordinary member of that class of investor, it is reasonable to assume an ability to read and understand documents like the promotional material in this case and at least a basic level of financial literacy, including an understanding that higher return means higher risk also, has to be considered in the actual context. It is not that ordinary and reasonable members of the class could not be expected to read and understand the promotional material. Nor is it that these notional persons are to be attributed with a lack of basic financial literacy. It is that the class included ordinary and reasonable people who would take the marketing material at face value and, considered as a whole, the marketing material was conveying that this was an investment for a term comparable to a bank term deposit with a similar level of risk, when that was demonstrably false.
In the overall context, the repeated description of the Mayfair products as “term-based investment options” is not neutral. It contributed to the message conveyed that the products were comparable to a bank term deposit. Similarly, the statement that the issuer is obligated to pay interest and repay principal irrespective of the performance of the underlying investments may be correct at one level, but is grossly misleading in fact (as, if the investments did not perform and the issuer experienced liquidity issues, they had a wide discretion to defer repayment of the principal) and does have a bearing on whether the investment is comparable to a bank term deposit. This is a key feature of bank term deposits to which the Mayfair products were being compared in the marketing material.
It does not matter that the investors who gave evidence did not say that they had understood the material as conveying the representations as pleaded and as found to have been conveyed. As noted, the test is objective. Moreover, there was evidence in the liability hearing that Mr Booth, one of the investors, thought he was investing in a product that “was comparable to or similar to an investment in a term deposit, and had a similar level of risk to a term deposit”.
Accordingly, and as ASIC also submitted (using “sophisticated” in the ordinary sense rather than as per the statutory quantification), the:
category of reasonable members of the class to whom the publications are directed cannot be taken to encompass only sophisticated and exclude unsophisticated investors. Even if it be assumed a sophisticated investor would understand that the Notes carried a materially higher risk than bank term deposits, that position does not translate to unsophisticated investors.
The appellants accept that, if made, the Bank Term Deposit Representations were false. It follows that there is no need to consider the operation of s 769C of the Corporations Act and s 12BB of the ASIC Act, which concern representations with respect to future matters.
For these reasons, grounds 1, 2 and 17 (other than 17(d)) of the appeal must be rejected.
4.3 Repayment Representations (grounds 3 and 4)
The Repayment Representations identified in the Amended Concise Statement at [12] were that “the defendants, in the course of trade or commerce, made representations to consumers that on maturity the principal would be repaid in full”. In the Amended Concise Statement at [14], ASIC alleged that the Repayment Representations were false, misleading or deceptive for two reasons:
(1)investors in the Mayfair products might not receive capital repayments at maturity or at all; and
(2)at maturity and even after a valid withdrawal notice, Mayfair could elect to extend time for repayment to investors for an indefinite period of time.
The primary judge found (at J1 [156]) that the Repayment Representations were made through statements in the promotional material such as the following:
(1)under the heading “Are my returns tied to the Issuer’s investment performance?”, the relevant promotional materials stated that “the issuer is obligated to pay the quoted rates of interest and principal on the [M+ Notes and the Core Notes], regardless of the performance of its investments”;
(2)“Mayfair 101’s investment products have been specifically designed to cater to investors seeking certainty and confidence in their investments”; and
(3)“Mayfair Platinum is … focused on providing investors with certainty in relation to their capital and interest payments; after all, certainty helps drive investor confidence”.
The eighth matter is that ASIC’s “enforcement action exposed the second respondent and related party purchasers to default on outstanding contracts of sale and to the potential consequences of loss of deposits and damages claims for breach of contract, dangers which Jason Tracy warned against in his first two reports”. This can be rejected on the same basis as the seventh complaint. In any event, it is not a material factor in favour of the appellants.
The ninth matter is that “to avoid the possibility of defaulting on outstanding contracts of sale, the second respondent and related party purchasers obtained short-term bridging finance from Naplend Pty Ltd”. The need for the short term loan from Naplend was considered, but was far from a mitigating factor. It was a need driven by the speculative structure of the investment scheme, see: J2 [59(h), (n)], [63(e), (m), (o), (u)], [219]. The idea that the primary judge did not have regard to this is unsustainable.
The tenth matter is that ASIC’s:
enforcement action deprived the second respondent and related party purchasers of the opportunity to raise funds to discharge the bridging finance, which then became locked it [sic] in at the default rate of interest of 48per cent per annum, consuming equity in the Core Notes investment scheme and diminishing the value of the securities held by the Security Trustee.
This rises no higher than the seventh matter rejected above.
The eleventh matter is that “all the investors who gave evidence were “wholesale clients” within the meaning of s 761G of the Corporations Act and most were wealthy and experienced investors”. The primary judge was not bound to accept, and must be inferred not to have accepted, that all investors were wealthy and experienced. Otherwise, the contention that the primary judge did not consider that the investors had to be “wholesale investors” given the liability judgment and the references in J2 [63(a), (j)] and [134] is untenable. In any event, the critical attribute in the present context is investment experience and knowledge, not wealth. Satisfaction of the statutory attribute of being a “wholesale client” is not an indicia of investment experience and knowledge.
The twelfth matter is that “investors who gave evidence on behalf of the appellants said they understood the risks of investing in the Mayfair Products”. The primary judge must have had regard to this evidence given his statement at J2 [254] that “[t]here are 281 investors (less those investors who the Defendants tendered affidavits from) that have been likely affected by the contravening conduct of the Defendants”. The fact that some investors understood what they were investing in was not a material mitigating factor.
The thirteenth matter is that:
the material which promoted the Mayfair Products made clear the products were only available for subscription by wholesale investors, contained warnings about the risks of the products, said the issuer was not a bank and that the investment products were not covered by the Financial Claims Scheme (the Federal Government guarantee for bank deposits).
The primary judge had regard to the statements in the liability judgment. The primary judge was rightly not satisfied that these statements negatived the misrepresentations. As such, the statements could not be a material mitigating factor.
The fourteenth matter is that “none of the investors who gave evidence said they had been induced by any of the alleged representations into investing in the Mayfair Products”. This is not to the point. As ASIC said in respect of the investors who gave evidence for the appellants (but which applies to this proposition as well):
It did not negate the primary judge’s findings that the representations were made, or that they were false and misleading, or that investors were likely to have been misled. Nor did it bear upon the nature of the appellants’ conduct or the extent of any losses suffered. It had no relevance to the assessment of penalties.
For these reasons, ground 29 in the Amended Notice of Appeal must be rejected.
5.10 Aggravating factors (ground 30)
Contrary to ground 30 in the Amended Notice of Appeal, it cannot be inferred that the primary judge treated as aggravating factors: (a) “the appellants’ reliance on legal advice concerning the promotional material for Mayfair Products”, (b) Mr Mawhinney’s lack of remorse, or (c) Mr Mawhinney’s failure to cooperate with ASIC. The primary judge rightly refused to make the findings the appellants sought and then used his findings as a reason not to accept that the asserted facts operated to mitigate the appellants’ culpability.
For these reasons, ground 30 in the Amended Notice of Appeal must be rejected.
5.11 Mr Mawhinney’s evidence (grounds 31 to 33)
Grounds 31 to 33 in the Amended Notice of Appeal allege that the primary judge erred in: (a) finding that Mr Mawhinney refused in cross-examination to accept that investors did not have first-ranking security over real estate assets, (b) not finding that Mr Mawhinney repeatedly acknowledged that investors did not have first-ranking security over real estate assets, and (c) finding Mr Mawhinney’s evidence was not honest and truthful.
The allegations of error are unsustainable. The primary judge did say at J2 [64] that “Mr Mawhinney refused to accept that investors did not have first-ranking security over real property assets”. However, this is a mere slip. The primary judge was grappling with the inconsistencies in Mr Mawhinney’s evidence: (a) refusing to accept any issue of concern with the fact that third party security was able to be granted over the real property assets held by the unit trusts which could reduce the value of the investors’ security over the units on the basis this was a “calculated risk and a low risk”, and (b) insisting that there were no misrepresentations about the security, and yet also saying the following in this exchange with the primary judge:
Mr Mawhinney, did you think it relevant to tell the investors that insofar as they had security over real property, it was just one property, and what the value of that property was?---Your Honour, it’s a good question. Our objective with the overall project was, with the Napla [Naplend] facility, for this to be a short-term, interim bridging facility to assist us with settling properties. Thereafter, as the project developed and as – no, actually, over time – the assets developed in value. We had in fact set the structure up since inception to allow for the properties to be mortgaged, such that over time, if we did seek to bring in place an institutional investor or even multiple institutional investors, that that could take place either at the first mortgage level or, in fact, at the unit trust level where, say, another private equity firm could come in and maybe buy 30 per cent of the units in each unit trust. So the structure allowed for that and it was by design since inception.
How this could be reconciled with other evidence that Mr Mawhinney gave is not apparent. For example, Mr Mawhinney was involved in these exchanges during cross-examination:
But not having first-ranking security direct over real property exposed the investors to the risk which eventuated that the real property could be used to secure directly third-party loans?---No, I disagree completely.
…
That was a risk that investors faced, wasn’t it, that that could happen? That’s - - -?---There’s many – there’s many risks associated with any investment, but it was a very calculated and managed risk.
…
Just try and focus on my question, Mr Mawhinney: did you think that the prospect that your group of companies would grant direct security over the real estate, thereby diminishing the value of security the investors had over the units, would never happen?---No. no, I disagree. It was a calculated risk and a low risk, at that, as Mr Moore – sorry, Mr Pearce – touched on earlier today. The LVR of the Napla [Naplend] loan was well under 30 per cent, if I recall correctly.
And when you realised you were going to give direct security to Napla [Naplend] over the real estate, thereby devaluing the value of the security of the units, did you disclose that immediately to investors – prospective investors?---There was no requirement to, Mr Moore. The – the assets that secured the noteholders was not necessarily diminished. If the moneys received from Napla [Naplend] was then advanced towards settling further properties, then the security pool would continue to, I guess, swell and increase in size over time. And it was all in - - -
…
You didn’t think it relevant to tell investors that that security wasn’t over real estate, it was over units in a trust that owned real estate; that that real estate was itself going to be the subject of first-ranking security to someone else. You didn’t think it relevant to disclose that to investors?---Our alpha document provided all the required disclosures.
The inconsistency and profound implausibility of this evidence speaks for itself.
The reference to Mr Mawhinney’s demeanour in J2 [64] does not disclose error merely because the hearing occurred over a video-conference. The primary judge was not precluded from taking into account Mr Mawhinney’s demeanour in making his assessment at J2 [64]. We refuse the invitation to view a recording of Mr Mawhinney’s evidence to assess his demeanour for ourselves. It is obvious from J2 [64] that the focus of the primary judge was on the disturbingly unsatisfactory content of Mr Mawhinney’s evidence. The content justified the conclusions. It included, for example: (a) his view that the appellants had complied with all disclosure requirements (contrary to J1), (b) he disclosed that enabling the granting of mortgages over the underlying real estate assets was part of the design of the investments since inception, despite also saying this was a calculated and low risk, and (c) his refusal to accept that there was anything wrong with telling investors that the security was over Australian real estate assets when that was a single property only because “it wasn’t required, and our legal advisors did not advise us of having any legal obligation to do so, given that section 708 doesn’t require any disclosures to wholesale clients”.
The adverse credit finding at J2 [64] involved no error.
For these reasons, grounds 31 to 33 in the Amended Notice of Appeal must be rejected.
5.12 Penalty manifestly excessive (ground 34)
Ground 34 is that the penalties were manifestly excessive.
We disagree.
First, to the extent that this ground depends on the other alleged errors which have been rejected, it cannot succeed.
Second, in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at [60] the Full Court of this Court said:
… the Court is not assisted by Optus’ citation of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a “range” of penalties appropriate in this case. As Middleton J rightly said in ACCC v Telstra Corporation Ltd (2010) 188 FCR 238 at [215]:
It is apparent that there are many difficulties in simply referring to penalties previously imposed for contraventions of legislation in widely differing circumstances or in circumstances where some of the factors are similar but others dissimilar to those of the present proceeding. In each case, the Court must take into account the deterrent effect of the penalty and the fact that the penalties “should reflect the will of Parliament that the commercial standards laid down in the Act must be observed but not be so high as to be oppressive”: see Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd [1978] ATPR 40-091 at 17,896.
In Volkswagen at [211] another Full Court made the same point that each penalty case turns on its own facts.
Australian Securities and Investments Commission v Gallop International Group Pty Ltd, in the matter of Gallop International Group Pty Ltd [2019] FCA 1514; (2019) 138 ACSR 395 and Australian Competition and Consumer Commission v We Buy Houses Pty Ltd (No 2) [2018] FCA 1748 are not comparable cases. In Gallop the potential loss was far less ([301]) and the maximum penalty for an individual involved in a contravention was $360,000 ([279]. In We Buy Houses the maximum penalty for the corporation was $1.1 million per contravention ([37]). The facts bear no similarity to the present case.
Third, it is also not the case that the total amount of the penalties ASIC sought but to which the appellants did not agree ($12 million) discloses that the total imposed by the primary judge ($30 million) is manifestly excessive and warrants appellate intervention. The High Court explained in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 at [48] that a “court is not bound by the figure suggested by the parties. The court asks “whether their proposal can be accepted as fixing an appropriate amount” and for that purpose the court must satisfy itself that the submitted penalty is appropriate”. The primary judge considered ASIC’s submission, saying at J2 [256]:
I am of the view that the penalties sought by ASIC are insufficient and do not fully recognise the serious nature and the extent of the loss and harm caused by the contravening conduct. The penalties sought by ASIC are not, in my view, sufficiently high to deter repetition of the contravening conduct by the Defendants and any would-be contraveners…
The primary judge did not commit any error in so concluding. His Honour was entitled to conclude that ASIC’s suggested penalties were well below the appropriate range having regard to the nature and circumstances of the contraventions.
Fourth, the appellants’ contentions of excessive penalties do not confront the reality that the maximum penalty per contravention for a corporation was $10.5 million: J2 [253]. The penalties imposed on each appellant do not equal the maximum for a single contravention for any appellant in circumstances where the primary judge had regard to the s 12GBB(5) considerations at J2 [176] and [255], and said at J2 [254] and [255] that: (a) “[t]here are 281 investors (less those investors who the Defendants tendered affidavits from) that have been likely affected by the contravening conduct of the Defendants”, (b) “the likely number of contraventions is very high, but cannot be conclusively established”, and (c) “the deliberate misleading and deceptive conduct, the lack of co-operation in this proceeding, the significant effect that the Defendants’ conduct has had on a number of investors and the Defendants’ complete lack of remorse, wrongdoing and regret… bear upon the level of deterrence required”.
Fifth, manifest excessiveness is a conclusion of error based on the penalty imposed as described in House v The King at 505, Reckitt Benckiser at [55]–[56] and Volkswagen at [202]–[213]. Given the maximum penalty and the large but indeterminate number of contraventions, the penalties the primary judge imposed were not manifestly excessive.
For these reasons ground 34 in the Amended Notice of Appeal must be rejected.
5.13 Adverse publicity order (ground 35)
Ground 35 in the Amended Notice of Appeal, which contends that the adverse publicity orders imposed by the primary judge should be set aside, may readily be rejected. The adverse publicity notices had utility. The primary judge dealt with this issue at J2 [267]–[269]. The primary judge was right to conclude at J2 [269] that:
adverse publicity orders in the form proposed by ASIC are appropriate to protect the public and inform the public of the Defendants’ contravening conduct as found in the Liability Judgment and in this Penalty Judgment. The adverse publicity orders are, in my view, necessary in order to better inform the public of the Defendants’ contravening conduct which Mr Mawhinney and the Defendants have sought to downplay in public statements and on the Mayfair 101 website.
In respect of the Mayfair 101 website downplaying the contraventions see J2 [202].
5.14 Injunction (ground 36)
Ground 36 in the Amended Notice of Appeal relates to the injunction the primary judge made on 21 January 2022. The injunction restrains the appellants from using any of certain phrases in any advertising, promotion or marketing by those parties. The phrases are: (a) “bank deposit”, with the exception of statements to the effect that the products are not, and are not comparable to, a bank deposit, (b) “certainty”, with the exception of statements to the effect that the products lack certainty, (c) “fixed term”, with the exception of statements to the effect that the products are not, and are not comparable to, fixed term investments, (d) “term deposit”, with the exception of statements to the effect that the products are not, and are not comparable to, a term deposit, and (e) “term investment”, with the exception of statements to the effect that the products are not, and are not comparable, to a term investment.
At J2 [266] the primary judge said:
I am satisfied on the evidence filed in this proceeding, both in the liability phase and in the penalty phase, that there is a utility and purpose in restraining the First, Second and Fourth Defendants from using the prohibited phrases in advertising, promotion or marketing undertaken by the First, Second and Fourth Defendants including on their website or through any online search platform advertisements. I am satisfied that such injunctions are necessary to protect the public from the First, Second and Fourth Defendants engaging in future contravening conduct.
The breadth of the injunction is problematic in that it does not relate to any particular product and does not confine the use of the phrases to the description of a product. The injunction refers to “the products” without defining them. The injunction also, for example, prevents the use of the word “certainty”, with the exception of statements to the effect that the products lack certainty. But the word “certainty” and words to that effect might properly be used to describe other aspects of products which have nothing to do with the payment of interest and repayment of principal.
Under s 12GD(1), if the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute a contravention of a provision of Div 2 of Pt 2 of the ASIC Act (or other defined conduct of an ancillary or accessorial kind), the Court may grant an injunction in such terms as the Court determines to be appropriate. That language mirrors the terms of s 80(1) of the CCA. The legislative history of that latter provision makes clear that the terms of an injunction need not be confined to enjoining contravening conduct: Australian Competition and Consumer Commission v Pacific National Pty Ltd [2020] FCAFC 77; (2020) 277 FCR 49 at [343] per Middleton and O’Bryan JJ. In ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 707; (1992) 38 FCR 248, Lockhart J described the power under s 80(1) as giving the Court capacity to formulate the appropriate remedy to suit the needs of the case (at 258), while Gummow J observed that the terms of an injunction would not be appropriate if the conduct enjoined does not have the relationship required by s 80 with a contravention of the Act (at 267). Subsequently, in Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd [1997] FCA 871; (1997) 78 FCR 197, Merkel J said (at 202):
The width of the power conferred by s 80 and its public interest character obviously give the Court great amplitude in determining appropriate injunctive orders in a particular case. However there are limitations on the Court’s power under the section. Confinement of the power by reference to the scope and purpose of the TPA, and in particular s 80, is one limitation on the power. However, there are at least two further limitations. The power to make orders under s 80 is only enlivened in a proceeding which alleges that there has been a contravention of a provision of Pt IV, IVA or V of the TPA. As was said by Gummow J in ICI at 267, the terms of an injunction granted under s 80 must, on their face, operate upon a range of conduct which has “the relationship required by s 80 with contravention of the Act”. Irrespective of whether the injunction is sought or granted under s 80(1) or s 80(1AA), there must be a nexus between the conduct alleged or found to constitute the relevant contraventions and the injunctions granted.
The alternative sources of power available to the primary judge in ss 1101B and 1324 of the Corporations Act are subject to similar considerations (see the discussion in the Mawhinney judgment at [155]–[164], and particularly at [158]).
In the present case, we consider that the breadth of the injunction is such that it cannot be said to have a sufficient connection with contraventions of the ASIC Act. The injunction restrains the use of specific words untethered to any particular products or context, and therefore without a sufficient nexus to contravening conduct.
We have considered whether the injunction could be reframed to avoid these kinds of problems. We are not persuaded it can or should be done in the context of this appeal on the basis of the information available to us. This is not because the injunction penalises one appellant for the contraventions of others, as all were found to have contravened other than in respect of the Security Representations. Nor is it so much that the injunction lacks utility as proposed in ground 36. The problem is that the injunction is so broad that it exposes an error of principle in the primary judge having made it in those terms.
Given the challenge made to the injunction and the supporting submissions which focus on the breadth of its terms, we consider that appellate intervention is warranted to this limited extent to set aside the injunction.
6. CONCLUSIONS
For the reasons given, the injunction should be set aside, but the appeal otherwise dismissed. The appellants should pay ASIC’s costs of the appeal.
I certify that the preceding two hundred and eighty-three (283) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Jagot, O'Bryan and Cheeeseman. Associate:
Dated: 10 October 2022
- AGLC
- Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170
- Case
- [2022] FCAFC 170
- Decision Date
CaseChat Overview and Summary
The legal issues before the court included whether the primary judge erred in admitting certain expert evidence without objection, whether the primary judge should have excluded the expert reports under the Evidence Act, and whether the primary judge's discretionary assessment of penalty was appropriate. The court found that the primary judge did not err in admitting the expert evidence, as the exclusionary rule in the Evidence Act only applies when objection is taken. Additionally, the court held that the primary judge's discretionary assessment of penalty was open to them, despite being higher than the penalty suggested by ASIC.
The court set aside the broad injunction against the publication of certain material, but dismissed the appeal otherwise. The Mayfair parties were granted leave to rely on the Amended Notice of Appeal and were ordered to pay the first respondent's costs of the appeal as agreed or taxed. The final orders of the court are to be entered in accordance with Rule 39.32 of the Federal Court Rules 2011.
Orders
Orders of the court
1. The appellants be granted leave to rely on the Amended Notice of Appeal.
2. The injunction made in paragraph 6 of the orders made on 21 January 2022 be set aside.
3. The appeal otherwise be dismissed.
4. The appellants pay the first respondent’s costs of the appeal 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
Full text does not contain this section.
Evidence
Evidence Before The Court
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
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