FEDERAL COURT OF AUSTRALIA
Noicos v Dawson [2019] FCA 2197
File number: SAD 271 of 2019 Judge: WHITE J Date of judgment: 18 December 2019 Catchwords: PRACTICE AND PROCEDURE – application for freezing orders against Respondents pursuant to r 7.32 of the Federal Court Rules 2011 (Cth) – Respondents alleged to have contravened s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) – Third Respondent opposed application on a number of bases including that he had not engaged in dishonest behaviour – whether there was a reasonably arguable case – whether there was a risk of dissipation of assets – consideration of balance of convenience – application allowed against First, Second, Third, Fourth and Sixth Respondents. Legislation: Australian Securities and Investments Commission Act2001 (Cth) ss 12BAA, 12BAB, 12DA, 12GF
Federal Court Rules 2011 (Cth) rr 7.32, 7.33
Cases cited: Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194
Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) [2012] FCA 1064
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Pearce v Waterhouse [1986] VR 603
Date of hearing: 18 December 2019 Date of last submissions: 18 December 2019 Registry: South Australia Division: General Division National Practice Area: Other Federal Jurisdiction Category: Catchwords Number of paragraphs: 29 Counsel for the Applicants: Mr J Cudmore with Mr H Gillis Solicitor for the Applicants: CCK Lawyers Counsel for the First, Second and Fourth Respondents: Ms M Hamlyn Solicitor for the First, Second and Fourth Respondents: Mellor Olsson Counsel for the Third Respondent: Mr A Carpenter Solicitor for the Third Respondent: Websters Lawyers ORDERS
SAD 271 of 2019 BETWEEN: THOMAS NOICOS
First Applicant
PASCAL TILGNER
Second Applicant
WILLIAM MCGRATH (and others named in the Schedule)
Third Applicant
AND: TIMOTHY JOEL YORKE DAWSON
First Respondent
MICHAEL SCOTT POMERY
Second Respondent
SING CHUNG YAP (ALSO KNOWN AS CHRIS YAP OR CHRISTOPHER YAP) (and others named in the Schedule)
Third Respondent
JUDGE:
WHITE J
DATE OF ORDER:
18 DECEMBER 2019
THE COURT ORDERS THAT:
1.Subject to Orders 2 and 3, Orders 5 to 17 inclusive made in this action by Justice Besanko on 10 December 2019, a copy of which are annexed hereto and marked ‘A’, continue in full force and effect until further order.
2.The time fixed by Order 10 of the freezing order directed to Mr Dawson and Mr Pomery is extended to 17 January 2020.
3.The continuation of the orders does not preclude the withdrawal of the funds held in the account of Countinghouse held with Bankwest BSB 325-122 Account Number 055‑708-7 for the purpose of payment of those funds to the Mellor Olsson Trust Account for the payment of legal expenses and does not preclude the Second Respondent withdrawing a sum up to $10,000 from the account BSB085-005, Account Number 777511555 held with NAB for the purpose of depositing that sum in the Mellor Olsson…
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- Case
- [2019] FCA 2197
- Decision Date
CaseChat Overview and Summary
The court found that the applicants had made out a prima facie case for the grant of the freezing orders. The applicants had provided sufficient evidence to demonstrate that there was a reasonably arguable case against the respondents for misleading and deceptive conduct in relation to financial services. The applicants had also demonstrated that there was a risk of dissipation of assets if the orders were not made. The balance of convenience also favoured the grant of the orders, as the applicants had shown that they were likely to succeed in their proceedings against the respondents and that the respondents had the means to compensate the applicants if they were ultimately found to be liable.
Based on the above findings, the court allowed the application for the issue of freezing orders against the first, second, third, fourth, and sixth respondents. The court found that the applicants had satisfied the requirements for the grant of freezing orders, and that it was appropriate to make the orders in the circumstances of the case. The court also noted that the third respondent, Mr Yap, had not opposed the continuation of the freezing orders concerning him, and that the applicants had satisfied the court that the continuation of the orders was appropriate.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
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Ratio Decidendi
Legal Principle Established
The grant of an application for the issue of a freezing order involves an exercise of discretion by the Court. The principles which inform the exercise of the discretion are well established. Applicants for freezing orders are expected to show that:(a)there is a reasonably arguable case on legal and factual matters or a sufficiently realistic prospect of them succeeding in obtaining relief against the respondent in the proceedings: Cardile v LED Builders Pty Ltd [1999] HCA 18, (1999) 198 CLR 380 at [68]; Pearce v Waterhouse [1986] VR 603 at 605; (b)there is a risk of dissipation of the assets if the order is not made: ibid at [25]‑[26], [41]‑[42]; and(c)the balance of convenience favours the grant of the injunction: Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194 at [13]. Consideration At today’s hearing, counsel for Mr Dawson and Mr Pomery did not oppose the continuation of the freezing orders concerning them. On the other hand, the third respondent Mr Yap, did oppose the continuation of the freezing order concerning him. As already noted, it is not for Mr Yap to dissuade the Court from the continuation of the freezing order: it is instead for the applicants to satisfy the Court that a continuation of the order is appropriate. The applicants’ pleaded cause of action, as I have already indicated, is based on s 12DA of the ASIC Act. That section provides that a person must not, in trade or commerce, engage in conduct in relation to financial services which is misleading or deceptive or is likely to mislead or deceive. The term “financial service” is defined diffusely in s 12BAB(1) of the ASIC Act. Relevantly for present purposes, it includes the activity of dealing in a “financial product”. That term is defined in s 12BAA of the ASIC Act to be a facility through which, or through the acquisition of which, a person makes a financial investment, manages financial risk, or makes non-cash payments. The affidavit evidence indicates that the applicants are investors in cryptocurrencies. Mr Noicos deposes that the respondents, in particular Mr Dawson and Mr Pomery, using the name Countinghouse Global and/or Countinghouse Fund, prepared and issued an Information Memorandum described as a “White Paper” which solicited investment in a cryptocurrency hedge fund. The applicants deposed to having made investments in the fund. Mr Noicos deposes that the aggregate amount of their base investment was approximately equivalent to, in AUD$2,322,442 with a value at 25 October 2019 said to be AUD$10,496,896.66. Prima facie, the conduct of the relevant respondents in the establishment and conduct of the cryptocurrency hedge fund appears to be conduct “in relation to financial services”. The applicants allege that, by their conduct in relation to the Information Memorandum and their subsequent statements, the respondents led investors to believe that their investments, which took the form of, and were styled as, Countinghouse Tokens (CHTs), were properly administered, had integrity, were managed appropriately by the respondents, and represented a genuine opportunity for investors to generate a financial return from investment in the CHTs.