Ronald Coshott and Australian Securities and Investments Commission - [2014] AATA 677

[2014] AATA 677

Division GENERAL ADMINISTRATIVE DIVISION

File Number(s)

2013/2068

Re

Ronald Coshott

APPLICANT

And

Australian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal
Ms J L Redfern, Senior Member

Date 17 September 2014

Place Sydney
The decision under review is affirmed.
.....................[SGD]...................................................
Ms J L Redfern, Senior Member
CATCHWORDS
CORPORATIONS LAW – permanent banning order – failure to comply with a financial services law –findings of dishonesty –whether director carrying on financial services business – involvement in contravention –misleading and deceptive conduct - failure to keep records–contraventions serious – good fame or character - evidentiary issues where allegations of dishonesty- whether Tribunal reasonably satisfied on available material of finding of dishonesty – decision affirmed
LEGISLATION
Australian Securities and Investments Commission Act 2001; s 1(2)
Corporations Act 2001; ss 79, 286, 761A, 761C, 766A, 910A, 911A, 912A, 920A(1)(d), 920A(1)(da), 920A(1)(e), 920A(1)(f), 920A(1)(g), 920A(1A), 920B, 920D(1), 1041G, 1041H, Pt 1.2 Div 3
CASES
Australian Securities and Investments Commission v Adler and ors (2002) 42 ACSR 80; [2002] NSWSC 483
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
HIH Insurance Ltd and HIH Casualty and General Insurance Ltd, Re: ASIC v Adler (2002) 42 ACSR 80
Shi v Migration Agents Registration Authority (2008) 235 CLR 286; [2008] HCA 31
Summers v Repatriation Commission (2012) 130 ALD 32; [2012] FCAFC 104
Briginshaw v Briginshaw (1938) 60 CLR 336
Sullivan v Civil Aviation Safety Authority (2013) AAR 77; [2013] FCA 1362
Sullivan v Civil Aviation Safety Authority [2013] FCAFC 93
Tweed v Australian Securities and Investments Commission (2008) 47 AAR 518
Australian Securities and Investments Commission v McDougall (2006) 229 ALR 158; [2006] FCA 427
Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561
Australian Securities and Investments Commission v Giann & Giann Pty Ltd (2005) 141 FCR 278; [2005] FCA 81
Australian Securities and Investments Commission v Drury Management Pty Ltd [2004] QSC 68 Australian Securities and Investments Commission v Manito Pty Ltd (2005) 53 ACSR 56; [2005] FCA 386
Risqy Limited, Re (No2) [2008] QSC 139
Pioneer Concrete Services Ltd v Yelnab Pty Ltd (1986) 5 NSWLR 254
Yorke v Lucas (1985) 61 ALR 307
Prothonotary of the Supreme Court of New South Wales v Alcorn [2007] NSWCA 288
McBride v Walton [1994] NSWCA 199
Re Davis (1947) 75 CLR 409; [1946] HCA 53
Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in Liq)
[2012] FCA 1028
Howarth and Australian Securities and Investments Commission (2008) 101 ALD 602; [2008] AATA 278
ASIC V PFS Business Development Group Pty Ltd (2006) 57 ACSR 553
ASIC v Australian Investors Forum Pty Ltd (No2) (2005) 23 ACLC 929
SECONDARY MATERIALS
ASIC Regulatory Guide 98, Licensing: Administrative action against financial services providers
Prof Ian Ramsay and David Noakes, ‘Piercing the Corporate Veil in Australia’ (2001) 19 Company and Securities Law Journal 250
REASONS FOR DECISION
Ms J L Redfern, Senior Member
17 September 2014
INTRODUCTION

The Applicant, Mr Ronald Coshott, was a director of Bay Pacific (Insurance Brokers) Pty Ltd (Bay Pacific) from May 1997 and from 2008 until its liquidation on 10 January 2013 was its sole director. Bay Pacific held an Australian Financial Services Licence (AFSL), or equivalent, from 28 January 1994 until 8 October 2013. Under the AFSL, Bay Pacific was authorised to carry on a financial services business and to provide financial product advice in respect of general insurance products.
On 14 March 2013 a delegate of the Australian Securities and Investments Commission (ASIC) permanently banned Mr Coshott from providing financial services. The ban was imposed on the basis that Mr Coshott was not of good fame or character and had failed to comply with a financial services law, namely the obligation not to engage in dishonest conduct in relation to a financial product or advice. The grounds for the banning was the finding by the ASIC delegate that Mr Coshott had embarked on a dishonest path of deceiving a client into believing that insurance had been obtained, issuing invoices for the non-existent insurance and creating false insurance documents.
Mr Coshott disputed these findings. He further contended that, even if it could be established that the invoices and certificates were false, he was not knowingly involved in these matters and that a consultant employed by Bay Pacific during 2010 and 2011 was responsible. Mr Coshott denied contravening a financial services law and denied that he was not of good fame or character. Furthermore, he contended that even though he had retired and did not intend providing financial services in the future, he wanted to clear his name.
It is common ground that if I find Mr Coshott is not of good fame or character and a banning order is warranted, there is no discretion to make an order limited in time and Mr Coshott must be permanently banned.
STATUTORY FRAMEWORK AND EVIDENTIARY ISSUES
ASIC is a statutory authority charged with responsibility for administering certain laws relating to corporations, financial services, financial markets and those who participate in the financial system. Under s 1(2) of the Australian Securities and Investments Commission Act2001 (the ASIC Act), ASIC must strive to, amongst other things, “promote the confident and informed participation of investors and consumers in the financial system”.
Chapter 7 of the Corporations Act2001 (the Corporations Act) deals with the regulation of financial services and markets.
Part 7.6 establishes a licensing regime in respect of persons or entities that carry on a financial services business in Australia. It is unlawful for a person or entity to carry on a financial services business unless they hold an AFSL covering the provision of the financial services: s 911A(1). A financial services business means a business of providing financial services: s 761A. A person or entity provides financial services if they provide financial product advice: s 766A(1)(a). It is not necessary to be licensed if the person or entity providing financial services is doing so as a representative of an AFSL holder: s 911A(2)(a). A person will be a representative if they are authorised under s 916A or if they are an employee or director of the AFSL holder: s 910A.
ASIC administers the licensing regime and is empowered to grant an AFSL (s 913B), impose conditions on the AFSL (s 914A), vary, suspend or cancel an AFSL (ss 915A to 915J) and, relevantly, make an order banning a person from providing financial services (s 920A). The order may ban a person permanently or for a specified period, unless ASIC has reason to believe the person is not of good fame or character (s 920B(s)).
Section 920A relevantly provides as follows:
ASIC's power to make a banning order
(1) ASIC may make a banning order against a person, by giving written notice to the person, if:
(a) ASIC suspends or cancels an Australian financial services licence held by the person; or
(b) the person has not complied with their obligations under section 912A; or
(ba) ASIC has reason to believe that the person is likely to contravene their obligations under section 912A; or
(bb) the person becomes an insolvent under administration; or
(c) the person is convicted of fraud; or
(d) ASIC has reason to believe that the person is not of good fame or character; or
(da) ASIC has reason to believe that the person is not adequately trained, or is not competent, to provide a financial service or financial services; or
(e) the person has not complied with a financial services law; or
(f) ASIC has reason to believe that the person is likely to contravene a financial services law; or
(g) the person has been involved in the contravention of a financial services law by another person; or
(h) ASIC has reason to believe that the person is likely to become involved in the contravention of a financial services law by another person.
(1A) In considering whether, at a particular time, there is reason to believe that a person is not of good fame or character, ASIC must (subject to Part VIIC of the Crimes Act 1914 ) have regard to:
(a) any conviction of the person, within 10 years before that time, for an offence that involves dishonesty and is punishable by imprisonment for at least 3 months; and
(b) whether the person has held an Australian financial services licence that was suspended or cancelled; and
(c) whether a banning order or disqualification order under Division 8 has previously been made against the person; and
(d) any other matter ASIC considers relevant.
(2) However, ASIC may only make a banning order against a person after giving the person an opportunity:
(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and
(b) to make submissions to ASIC on the matter.
Given ASIC’s contention that there is reason to believe Mr Coshott is not of good fame and character, s 920B(2) is relevant and provides as follows:
(2) The order may prohibit the person against whom it is made from providing a financial service:
(a) permanently; or
(b) for a specified period, unless ASIC has reason to believe that the person is not of good fame or character.
By letter dated 7 January 2013, a delegate of ASIC caused to be served on Mr Coshott a notice which particularised the following concerns regarding Mr Coshott:
(a)that he may not have complied with a financial services law (s 920A(1)(e));
(b)that the delegate may have reason to believe that Mr Coshott was not of good fame or character (s 920A(1)(d)); and
(c)that he was likely to contravene a financial services law (s 920A(1)(f)).
The financial services law identified was s 1041G, which provides as follows:
Dishonest conduct
(1) A person must not, in the course of carrying on a financial services business in this jurisdiction, engage in dishonest conduct in relation to a financial product or financial service.
Note 1:       Failure to comply with this subsection is an offence (see subsection 1311(1)).
Note 2:       Failure to comply with this subsection may also lead to civil liability under section 1041I.
(2) In this section:
"dishonest" means:
(a) dishonest according to the standards of ordinary people; and
(b) known by the person to be dishonest according to the standards of ordinary people.
After providing Mr Coshott with an opportunity to appear at a hearing and make submissions, the delegate provided written reasons to Mr Coshott dated 14 March 2013. The reasons notified Mr Coshott that the delegate had made findings he had not complied with s 1041G of the Corporations Act and that there was reason to believe he was not of good fame or character. The delegate made no finding about whether there was reason to believe Mr Coshott was likely to contravene a financial services law on the basis that it was not necessary to do so. Mr Coshott was permanently banned from providing financial services.
ASIC has published a regulatory guide in respect of its approach to the exercise of its administrative functions in respect of financial services, being ASIC Regulatory Guide 98, Licensing: Administrative action against financial services providers. Regulatory Guide 98 (RG 98) explains ASIC’s approach and, relevant to this case, how it will exercise its discretion under s 920A of the Corporations Act.
As noted by Brennan J, as President of the Administrative Appeals Tribunal, in Re Drake and Minister for Immigration and Ethnic Affairs (Drake No 2) (1979) 2 ALD 634, the Tribunal is entitled to have regard to government policy unless the policy is unlawful or there are cogent reasons to the contrary. However, simply deciding the matter in accordance with ASIC policy without regard to whether a more appropriate outcome might have been reached would be an error of law. In Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 Bowen CJ and Deane J stated at 590:
...the Tribunal is not, in the absence of specific statutory provision, entitled to abdicate its function of determining whether the decision made was, on the material before the Tribunal, the correct or preferable one in favour of a function of merely determining whether the decision made conformed with whatever the relevant general government policy might be.
There was no suggestion from Mr Coshott’s legal representatives that RG 98 was unlawful or that there were cogent and sufficient reasons to depart from the policy. Furthermore, I have not identified any deficiencies to suggest such a conclusion should be reached. Indeed, it should be noted that RG 98 expressly provides that the factors and examples set out in the tables to RG 98 are “indicative only” and that “each case must depend on its particular circumstances and will be determined on a case-by-case basis”. It is further noted that factors in the table have been compiled taking into account the propositions formulated in HIH Insurance Ltd and HIH Casualty and General Insurance Ltd, Re: ASIC v Adler (2002) 42 ACSR 80. Regulatory Guide 98 has been produced by an agency which has responsibility for regulation of the provision of financial advice, appears sound and is consistent with authoritative case law. I therefore propose to have regard to RG 98 insofar as it is relevant to the facts in this case.
Regulatory Guide 98 identifies factors such as the nature and seriousness of the suspected conduct, the public benefit in making orders, any mitigating factors and the likelihood of general or specific deterrence as being relevant to the issue of whether banning orders should be made and, if so, the period of the banning. According to RG 98, a banning order of three years or less may be appropriate where the conduct alleged is the result of carelessness or inadvertence, there has been an attempt to remedy the contravention, the person has fully cooperated with ASIC and there is no or minimal loss to clients. A banning of three to 10 years may be appropriate where the alleged conduct is inconsistent with the orderly operation of financial markets, there is false, misleading or deceptive or unconscionable conduct, being conduct with a lesser degree of dishonesty, there is incompetence or a high level of carelessness, or there is disregard for the law and compliance with regulations. Finally, a banning of 10 years or more or a permanent banning would be considered to be appropriate where there was dishonesty or intent to defraud, continued knowing and wilful contraventions of the law, serious incompetence and irresponsibility, likelihood of the person engaging in contravening conduct in the future and any dishonest conduct involving clients.
Section 1317B of the Corporations Act provides that applications for review of a decision of ASIC may be made to this Tribunal. The Tribunal conducts its own independent assessment and, while it must address the same question as is required to be addressed by the original decision-maker, the Tribunal is not confined to the grounds argued at the original hearing. The Tribunal must make the correct and preferable decision based on the material and evidence before it and, subject to procedural fairness, may make a decision on different grounds from those argued by the parties: Shi v Migration Agents Registration Authority (2008) 235 CLR 286; [2008] HCA 31; Summers v Repatriation Commission (2012) 130 ALD 32; [2012] FCAFC 104.
Both parties raised an issue about the reasoning process that should be adopted by the Tribunal in reviewing the decision of the ASIC delegate. Mr Coshott submitted that, given the case involved allegations of dishonesty, the principle embodied in Briginshaw v Briginshaw (1938) 60 CLR 336 was a “useful and indeed vital tool” for the Tribunal to use in assessing whether it was satisfied dishonesty occurred. ASIC submitted that the Tribunal is not bound to apply the Briginshaw standard in a case such as this, provided its findings are properly supported by logically probative evidence and are reasonably open. Parties are not subject to a burden of proof and the task of the Tribunal is to make the correct and preferable decision.
This issue is often raised in administrative decision-making, particularly in respect of disciplinary proceedings against professionals or licensing proceedings against those who are authorised to undertake regulated conduct. Notwithstanding ASIC’s submissions at the hearing, the ASIC delegate noted that she had applied the Briginshaw standard as to the satisfaction of proof.
Whether this Tribunal is bound by the principles in Briginshaw was recently considered by Jagot J in Sullivan v Civil Aviation Safety Authority (2013) AAR 77; [2013] FCA 1362 and by the Full Court of the Federal Court (Logan, Flick and Perry JJ) in Sullivan v Civil Aviation Safety Authority [2013] FCAFC 93. This case concerned the cancellation of Mr Sullivan’s helicopter licence following a crash in the Northern Territory while he was flying. The question for determination was whether Mr Sullivan was a fit and proper person to hold a licence. In the appeal, senior counsel for Mr Sullivan accepted that the Tribunal was not bound by the rules of evidence but contended that the principle in Briginshaw was not a rule of evidence but a principle of law which the Tribunal was bound to follow.
In Briginshaw the High Court considered the standard of proof required to establish what was, at that time, the serious allegation of adultery. Latham CJ identified the principle as “the rule of prudence”, namely, that any Tribunal should act “with much care and caution” before finding that a serious allegation is established (at 347). Dixon J observed (at 362):
The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the Tribunal. In such matters reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences.
In Sullivan, Flick and Perry JJ noted (at [108] – [109]) that there were two fundamental difficulties with the proposition advanced for Mr Sullivan. First, there was difficulty in identifying those facts which would properly be characterised as serious or grave. Secondly, the proposition was “inconsistent with the very charter entrusted to the Tribunal”. Their Honours expanded on this by noting (at [110]) that decision-making in the commercial context “does not necessarily attract any greater degree of caution in fact-finding than decision-making in (for example) social security or welfare contexts”. They accepted that some findings of fact, such as fraud or lying, called for “considerable caution before being made” (at [111]). However they also recognised that curial proceedings were “inherently different from the tasks entrusted to decision-making by administrative Tribunals and the Administrative Appeals Tribunal in particular”, which has been “entrusted with jurisdiction to review decisions by over 400 Commonwealth Acts and legislative instruments” (at [114]).
In summary, Flick and Perry JJ rejected the proposition that this Tribunal is bound by Briginshaw as a principle of law, although they recognised that the Tribunal “may express greater caution” when evaluating the factual foundation for a decision reached when the particular fact is more centrally critical to the decision (at [120]).
Logan J also dismissed the appeal but disagreed with the observations of Jagot J insofar as she opined that there was no justification to impugn the reasoning processes of the Tribunal for not having reasoned by reference to Briginshaw. According to Logan J, citing Minister for Immigration and Ethnic Affairs v Pochi (1981) 149 CLR 139; [1981] HCA 58, the fact that there is “some material to warrant a particular conclusion may not always be a complete answer” (at [10]). The Tribunal must “not lightly” reach conclusions in respect of decisions which are attended with grave consequences and while not bound by the rules of evidence, it must act reasonably (at [15]-[16]).

In the present case, there is an allegation by ASIC that Mr Coshott was dishonest over a sustained period. It is alleged Mr Coshott deliberately falsified records to collect and retain premium without affecting the relevant insurance policies. It is further contended that Mr Coshott later falsified documents when he was questioned about the insurance policies and provided unreliable evidence to ASIC investigators and this Tribunal. These allegations are central to the contention that Mr Coshott is not of good fame or character and that he should be permanently banned.
My task is to make the correct and preferable decision but in so doing I must form a view about whether Mr Coshott has engaged in dishonest conduct, has otherwise contravened a financial services law, and whether there is reason to believe he is not of good fame or character. While I am not bound by the rules of evidence, it is clear from the decision of the Full Court in Sullivan that any finding of dishonesty or that Mr Coshott is not of good fame or character must be based on logically probative material. Neither party bears an onus of proof but given the gravity and improbability of the allegations, I must be reasonably satisfied on the available material before making such findings.
The level of satisfaction, namely whether it should be “very high” (as contended by Mr Coshott) or “reasonably open” (as contended by ASIC) is not a useful or particularly meaningful measure. I accept that any adverse findings made about dishonesty or fame and character should be made with caution and that the nature and extent of the available evidence is an important consideration. Inexact proofs and circumstantial inferences that are not corroborated or otherwise supported would therefore be unlikely to lead to adverse findings about honesty or fame and character. This is the approach I have adopted in assessing the evidence.
BACKGROUND FACTS
Mr Coshott has been an insurance broker for approximately 25 years and was the principal and sole director of Bay Pacific from 2008. He provided insurance advice to clients and had a long association with the Avramides family, who own the Santos Food Company Pty Ltd and associated companies. Mr Coshott provided services and insurance advice to companies associated with Mr Alexander Avramides, including Avrocorp Pty Ltd (Avrocorp), Grand National Hotel Pty Ltd (GNH) and Grand National Concierge Pty Ltd (GNC).
Bay Pacific was voluntarily liquidated after Mr Coshott caused its business to be sold in 2012. Until this time, Bay Pacific operated from an office suite in Bondi Junction, which was shared from about January 2011 with Mr Edward Conrick, chartered accountant and registered auditor. Ms Annabelle Moloney was employed by Bay Pacific as office manager and personal assistant to Mr Coshott. She has continued in the role as his personal assistant since the liquidation of Bay Pacific. Bay Pacific employed part-time staff from time to time to assist with ‘back office’ tasks.
The share capital of Bay Pacific comprised a number of classes. At all relevant times, namely from 2008 until its liquidation, each class of the shares in Bay Pacific was held in its entirety by either Mr Coshott or Fewin Pty Ltd. Mr Coshott is the sole director and shareholder of Fewin Pty Ltd.
The GNH insurance policies
Mr Avramides is a director and shareholder of Avrocorp, which owns premises located in Paddington known as the ‘Grand National Hotel’(the Hotel). GNH leases the hotel from Avrocorp and operates the hotel business. Mr Avramides is a director and shareholder of GNH.
From 1999 until March 2012, Avrocorp and GNH were clients of Bay Pacific. The insurance policies for these companies were generally renewed in about March of each year, but from about 2009 to 2011, the policies for GNH were renewed every six months. At this time, Mr Avramides was contemplating a major renovation of the Hotel. The renovation did not proceed and the hotel remained operational throughout the period.
As at March 2009, GNH held business liability insurance with SRS Underwriting Agency Pty Ltd (SRS) and public liability insurance with ASR Underwriting Agency Pty Ltd (ASR).
According to Mr Coshott, and this is the subject of dispute with Mr Avramides, GNH decided not to renew its business and public liability insurance from March 2009 due to the proposed renovations. On Mr Avramides’ account, he made no such decision and believed that the Hotel was insured after March 2009.
On or about 11 November 2010, Mr Avramides received two tax invoices on the letterhead of Bay Pacific in respect of insurance for the Hotel. The tax invoices were said to be for business insurance with SRS (policy number SRS 55289) and public liability insurance with ASR (policy number 200 2413) for the period 15 October 2010 to 31 March 2011. The invoices were for a total of $9,019.11 and were paid by GNH to Bay Pacific.
GNH entered into a premium funding contract on 25 May 2011 with Inpartnership Funding Pty Ltd (Inpartnership) for $24,390.58, comprising premium and credit charges in respect of business and public liability insurance for GNH for the period 31 March 2011 to 31 March 2102. While there is dispute as to how GNH came to enter into the contract, the fact the contract was executed and monies were advanced to GNH is not in dispute. The premium, which included an amount for commission, was paid to Bay Pacific. Again, this is not in dispute. GNH repaid the loan to Inpartnership by monthly instalments of $2,034.41.
It is not in contest that invoices were issued to GNH by Bay Pacific for the 2010/2011 and 2011/2012 policy periods, and that these invoices were paid by GNH and were not remitted to either SRS or ASR.
According to evidence from officers of ASR and SRS, neither underwriter issued insurance policies in respect of GNH after the lapse of their respective policies in March 2009. The last policy underwritten with SRS was evidenced by a certificate of insurance issued to GNH by SRS, being a Lloyd’s Certificate on SRS letterhead (policy number PROP 07 0000983), for the period 13 March 2008 to 13 March 2009. The last policy underwritten with ASR was evidenced by a certificate of insurance issued to GNH by ASR, being a Lloyd’s Certificate on ASR letterhead (policy number 2002413), for the period 13 March 2008 to 13 March 2009. The policies were lapsed at the request of Mr Coshott.
This account is consistent with the following documents which have been provided to the Tribunal:
(a)An email dated 11 February 2009 from SRS to Bay Pacific, attaching renewal terms, annotated with a handwritten note to the following effect:
Spoke with Ron who confirmed that the business will be closing for 6 months to renovate. policy to be lapsed. cover will be required again once work has been completed.
(b)An email from Mr Coshott to Mr David Rizeman of SRS dated 16 March 2009 to the following effect:
Hotel is being totally rebuilt internally and re-equipped over the next 6 months and will be covered under Builder’s CAR. On completion, we will resubmit to you for insurance cover quote.
(c)Written notice from Bay Pacific to SRS dated 16 March 2009 to this effect, headed “Closing Lapse”. The notice was expressed to be in respect of policy number SRS 55289 and recorded as follows:
We refer to the policy detail below and advise that cover is not required. Please amend our accounts and your records accordingly.
(d)Two emails from ASR to Bay Pacific about the renewal of the policy on 19 January and 25 February 2009 and an email in response from Mr Coshott to ASR dated 16 March 2009 to the following effect:
Cover not required at this time as Hotel closed for total renovation, upgrade, refurbishment and fit out for the next 6 months.
(e)Lapse notification dated 6 April 2009 from ASR to Bay Pacific in respect of policy number 2002413.
There is no evidence that this correspondence was provided to Mr Avramides or GNH by Mr Coshott.
In his evidence, Mr Coshott maintained that Mr Avramides had instructed him he did not want to renew the policies. Mr Avramides denied this and, while there was significant dispute about discussions said to have taken place around this time, it is clear there was significant acrimony between Mr Avramides and Mr Coshott by at least early 2012.
In late 2011/early 2012, Mr Avramides decided to use a new insurance broker and in early March 2012 Mr Coshott confronted him about this. On or about 8 March 2012 (although Mr Avramides says he did not receive this until about 20 March 2012), Mr Coshott sent a letter to Mr Avramides advising that the “two current insurers” for business and public liability insurance had advised the Hotel premises/operations no longer met their underwriting criteria and they would not be offering insurance terms for the renewal of the cover for the coming period of insurance. All cover would cease at 4 pm on 31 March 2012 and Bay Pacific would “not be able to assist in obtaining cover for the coming period of insurance”. Mr Coshott requested that Mr Avramides make alternative insurance arrangements.
Mr Avramides was concerned about this and emailed the letter to his new brokers, Ms Tanya Sadowski and Mr Paul Carter of Cresmont Holdings Pty Ltd (Cresmont) trading as Provident Insurance Services. Cresmont was an authorised representative of AFM Insurance Brokers Pty Ltd (AFM). Following this email, Mr Carter and Ms Sadowski commenced investigations into the insurance cover for GNH.
Investigations into the insurance policies
ASIC contends that Mr Coshott’s response to these investigations, and subsequent investigations by The Corporation of Lloyd’s (also known as Lloyd’s of London) and ASIC, are significant. It is therefore relevant to detail these matters. Many of the key facts are not in contest and are evidenced by documents.
As a result of investigations by Mr Carter, Ms Sadowski and others at Cresmont and AFM, Mr Carter concluded GNH did not have any insurance cover with SRS and ASR after March 2009. Mr Carter emailed Mr Coshott on 23 March 2012 raising concerns about the GNH cover given SRS and ARS had both confirmed cover had lapsed from 13 March 2009. He requested details of the current policies and asked Mr Coshott to confirm the underwriters for the previous period.
Mr Coshott responded by email dated 23 March 2012 to the following effect:
In response to your email we wish to advise that the Grand National Hotels covers for business pack and public liability are indeed in force until 31 March 2012, through a facility we have in London into Lloyd's underwriters.
Furthermore, we had requested that formal written declinature of renewal not be issued, so that the insured would not have to disclose a declinature to a new underwriter. Therefore, this advice was only verbally given to us, in order to facilitate the insured in gaining cover elsewhere.
In accordance with the Privacy Act’s requirements, if there are any other matters arising would you please have Mr Alex Avramides contact our office directly.
By email dated 26 March 2012 to Mr Coshott, Mr Avramides requested details of the current policies. Mr Coshott responded by email dated 28 March 2012 attaching copies of documents, the originals of which were said by him to have been sent under cover of letters dated 15 June 2011.
The documents provided where two letters from Bay Pacific to GNH both dated 15 June 2011, one enclosing documents said to relate to business combined insurance for the period 31 March 2011 to 31 March 2012 and the other said to relate to combined liability insurance for the same period. Both certificates were headed “Lloyd’s Certificate of Insurance” and were recorded as being effected through Bay Pacific. The certificate number for the business insurance was recorded as “PROP 11 0000983” and the certificate number for the public liability insurance was recorded as “2002413”. With the exception of a different number which appears to represent the year at the commencement of the cover for the business insurance, these certificate numbers were the same as the certificate numbers for the SRS and ARS insurance for the period ended 13 March 2009. There was a seal on the certificate for the business insurance which noted “Insurance Arranged at Lloyd’s &/or Coys” in the centre of the seal with the words “Underwriting Agency” and AFSL 290518 and ABN 89 113 929 516 recorded on the outer circle of the seal. This was identical to the SRS seal applied to the certificate for 2008/2009 but the initials “SRS” were not included on the seal for the 2011/2012 certificate. There was no seal applied to the certificate for the combined liability insurance.
Copies of the 2011/2012 certificates were provided by AFM to Lloyd’s of London. Mr David Wood, an executive in Regulatory Risk at Lloyd’s of London, investigated the provenance of the certificates. He provided a witness statement, which was not disputed.
According to Mr Wood, Lloyd's of London is not an insurer but comprises individual and corporate underwriters that banded together for administrative purposes into groups called “syndicates”. The syndicates were managed by agents who employed professional underwriters to underwrite insurance risks on behalf of the syndicate. A cover holder is a firm, either in the United Kingdom or overseas, that is authorised by a managing agent under the terms of binding authority to enter into contracts of insurance to be underwritten by members of the syndicate managed by the managing agent. The cover holder issues insurance cover on behalf of the members of the syndicate in line with the binding authority. SRS and ASR are cover holders approved by Lloyd's of London.
Mr Wood’s role was to protect the Lloyd's of London brand and licenses against fraudulent misrepresentation and misuse. In March 2012 he conducted searches of the Lloyd’s of London records to ascertain whether Bay Pacific or Mr Coshott held an underwriting authority to act on behalf of the Lloyd's syndicate. According to Mr Wood, his searches disclosed that neither held such authority.
Mr Wood sent an email to Mr Coshott dated 29 March 2012, which included the following:
I note from the attached documentation that you refer to yourself as a ‘coverholder’. According to the systems available to me, I do not have any records which identify either you specifically or Bay Pacific Insurance Brokers as currently being or having ever been Lloyd's Syndicate, Lloyd's accredited broker, coverholder or indeed as having any commercial relationship with Lloyd's. I would be grateful for clarification in this regard
Mr Wood requested a copy of any authorisation from Lloyd's of London in this email.
There was no response to this email and Mr Wood sent further emails on 30 March 2012 and 2 April 2012 requesting that Mr Coshott respond to the previous emails. When Mr Wood received no response he asked a colleague to telephone Mr Coshott's office. The colleague was apparently advised that Mr Coshott was interstate so Mr Wood decided to send a letter to Bay Pacific on 3 April 2012. He then followed this with a further email on 5 April 2012. There was no response and by letter dated 18 April 2012 Mr Wood sent a “cease and desist letter” to Bay Pacific threatening legal action. A copy of this letter was emailed to Bay Pacific on 27 April 2012.
Mr Coshott responded to Mr Wood’s correspondence by letter dated 30 April 2012. In Mr Coshott’s letter it was noted that Mr Wood's letter of 3 April 2012 had been received in the office on 15 April 2012. It was also noted that the letter of 18 April 2012 and email of 27 April 2012 had been received but the previous emails of 29 and 30 March 2012 and 2 April 2012 had not been received because Bay Pacific had “restricted email sender acceptance”. Mr Coshott denied wrongfully holding out Bay Pacific as a representative of Lloyd's of London and stated that all Bay Pacific requirements for Lloyd's covers had been placed through Lloyd's authorised representatives in Australia. Mr Coshott further stated as follows:
We are therefore at a loss to explain how Bay Pacific's name appears on the mentioned certificate, other than assuming it to be an administrative error by the issuing party.
Mr Wood responded by email dated 30 April 2012 requesting further information and, in particular, asking whether Bay Pacific had produced the certificates of insurance attached to his emails and correspondence, being the certificates attached to the Bay Pacific letter of 15 June 2011. There was no response to this email, nor follow up emails dated 3 and 9 May 2012. In the absence of a response, Mr Wood sent a letter to Mr Coshott dated 18 May 2012. There was a follow up email sent by a colleague of Mr Wood, dated 1 June 2012. According to Mr Wood, he received no response from Mr Coshott to his emails or correspondence other than the letter dated 30 April 2012. This is not in dispute.
In the meantime, a complaint was made to ASIC and ASIC commenced investigations in about May 2012. A notice to produce documents was served on Mr Coshott at his premises on 23 August 2012. Officers of ASIC also interviewed Mr Coshott on this day and interview notes were prepared following the meeting. Mr Coshott disputed the accuracy of the notes but not receipt of the notices or the nature and extent of his compliance with the notices.
Mr Coshott has always maintained that he employed a contractor, Mr Terry O’Brien, who arranged the GNH cover for 2010 and 2011. According to Mr Coshott, Mr O’Brien was from the United Kingdom but was in Australia on a working holiday. He worked at Bay Pacific in the evenings and on weekends. There is no documentary evidence corroborating Mr O’Brien’s employment or his role with Bay Pacific, other than the evidence of Mr Coshott and his assistant, Ms Moloney. There was evidence from a cleaner about Mr O’Brien’s presence in the Bay Pacific office but, in contrast, there was evidence from Mr Avramides that he had never dealt with Mr O’Brien and from Mr Conrick that he had never seen Mr O’Brien. Mr O’Brien could not be located or contacted by either party and did not give evidence.
There was no evidence provided to the Tribunal by either party to explain how the 2012 invoices and certificates for 2011/2012 were produced.
ASIC contended the invoices and certificates were false and that there was no insurance cover for GNH from March 2009. Mr Coshott could not explain the 2011/2012 certificates and in his Amended Statement of Facts and Contentions, contended that the GNH insurance was arranged by Mr O’Brien, not him. In submissions filed on his behalf, it was conceded that the insurance cover referred to in the 2011/2012 certificates did not exist but it was contended Mr Coshott was not aware of this.
In summary, the contentious factual matters between the parties were within narrow compass but the parties were diametrically opposed. On ASIC’s case, Mr Coshott had engaged in dishonest conduct in lapsing the insurance cover for GNH in March 2009, claiming premiums and creating false invoices for 2010 and 2011, and creating false certificates for 2011/2012 when the GNH insurance was investigated. On Mr Coshott’s case, he relied on Mr O’Brien to arrange insurance for GNH and did not create, nor was he aware of any false invoices or certificates of insurance.
CONTENTIONS AND ISSUES FOR DETERMINATION
ASIC contended that Mr Coshott did not comply with s 1041G and that the discretion under s 920A of the Corporations Act is thereby enlivened. His conduct was dishonest, was over a sustained period and had the potential to cause serious damage to GNH. Mr Coshott’s conduct demonstrated that he was not of good fame or character and permanent disqualification from providing financial services is appropriate in the circumstances. The decision of the delegate should be affirmed.
Mr Coshott denied he breached any financial services laws and, in particular, that he was dishonest. He denied falsification of records and any misconduct. Mr Coshott also denied that he carried on a financial services business at the relevant time. The Tribunal could not be satisfied to a “very high level of satisfaction” about the conduct alleged by ASIC or that he had contravened s 1041G of the Corporations Act. Even if there were contraventions, any non-compliance with financial services laws was insignificant or an honest error for which he ought to fairly be excused. He reasonably placed reliance on a third party. As such, a banning order is not warranted in the circumstances and the decision of the delegate should be set aside.

Having regard to the submissions of the parties and the material before the Tribunal, the issues in dispute and questions for determination are:
(a)Did Mr Coshott contravene s 1041G of the Corporations Act? In particular, did he engage in dishonest conduct in the course of carrying on a financial services business?
(b)If Mr Coshott was not carrying on a financial services business at the relevant time, was he nonetheless involved in the contravention of s 1041G?
(c)Did Mr Coshott contravene any other financial services law?
(d)Is there reason to believe that Mr Coshott is not of good fame or character?
(e)Is there reason to believe that Mr Coshott is likely to contravene a financial services law or that he is not competent to provide a financial service or financial services?
(f)If any or all of the answers to (a) to (e) is yes, should Mr Coshott be banned and, if so, for how long?
CONTRAVENTION OF SECTION 1041G OF THE CORPORATIONS ACT
Preliminary issue: Was Mr Coshott carrying on a financial services business at the relevant time?
For there to be a breach of s 1041G, a person must engage in dishonest conduct in relation to a financial product or service in the course of carrying on a financial services business. Section 761A of the Corporations Act provides that a "financial services business" means a business of providing financial services and notes that the meaning of “carry on” a financial services business is affected by s 761C. Section 761C provides that Division 3 of Part 1.2 needs to be taken into account when working out whether someone carries on a financial services business. Division 3 does not provide a definition but rather describes matters which may include or exclude the carrying on of a financial services business in Australia. Those matters are not relevant to the circumstances of this case and are therefore of little assistance. As such, the question of whether a person is carrying on a financial services business should be assessed by reference to the ordinary meaning of these words.
There is no dispute that Bay Pacific was carrying on a financial services business or that Mr Coshott provided financial services as a representative of Bay Pacific. Mr Coshott disputes that he engaged in dishonest conduct but also disputes that he himself was carrying on a financial services business. According to Mr Coshott, Bay Pacific carried on a financial services business as an insurance advisory business. Bay Pacific held the financial services licence and, even though he was its director and the sole adviser in the relevant period, he performed services and gave advice on behalf of Bay Pacific, not on his own account.
Mr Coshott relied on Tweed v Australian Securities and Investments Commission (2008) 47 AAR 518, where Forgie DP found that even though Mr Tweed formulated and implemented the strategy to approach shareholders to purchase shares, he was doing so as a director of National Exchange Pty Ltd, not on his own account. She found that Mr Tweed was not carrying on a financial services business as illustrated by the following (at [102]):
There is nothing in these passages that suggest that the actions of the corporation can be attributed to the individual person who is its directing mind and will. The corporation has no directing or controlling mind to attribute to another and the legal fiction works only to give it one. The legal fiction does not work in reverse...
And as follows (at [113]):
......I am not satisfied that Mr Tweed has engaged, or has purported to engage, in a financial services business. Certainly, he was the person who decided which shares in which companies would be targeted, how the offers would be formulated, how they would be presented and when they would be sent. If done on his own behalf, his actions would lead to the conclusion that he was carrying on a financial services business. As it was, they were done on behalf of National Exchange while he acted as a director of National Exchange and on its behalf. No doubt he ultimately benefitted as a shareholder of National Exchange but he did so in a different capacity from that in which he undertook the course of conduct. I find that Mr Tweed was not carrying on a financial services business in this jurisdiction.
ASIC distinguished the decision in Tweed on the basis that Forgie DP rejected the proposition Mr Tweed had failed to comply with a financial services law simply because National Exchange contravened a financial services law and he was its director. ASIC does not contend this and relied on the comments of Young J in Australian Securities and Investments Commission v McDougall (2006) 229 ALR 158; [2006] FCA 427.
Mr McDougall was the sole director of a company alleged to have been carrying on an unregistered managed investment scheme. He was also the registered proprietor of the business name “Chargeitcards”. His Honour found that both Mr McDougall and the company operated the illegal scheme and thereby carried on a financial services business. Relevantly, his Honour found (at [50] – [51]):
I consider that McDougall, as the sole director and controller of BTS and as one of the registered owners of the business name Chargeitcards, was also carrying on an unlicensed financial services business in contravention of s 911A(1). Further and in any event, McDougall was acting as a representative of BTS in offering and promoting memberships in the Scheme. As such, McDougall was only exempt from the requirement that he hold an Australian financial services licence if BTS itself held such a licence, and it did not.
Numerous cases have held that s 911A of the Act extends to a company director who conducts or is involved in a company’s carrying on of a financial services business without an Australian financial services licence: see Australian Securities and Investments Commission v Giann & Giann Pty Ltd [2005] FCA 81; (2005) 141 FCR 278; Australian Securities and Investments Commission v Manito Pty Ltd [2005] FCA 386; (2005) 53 ACSR 56; Australian Securities and Investments Commission v Drury Management Pty Ltd [2004] QSC 68.
His Honour also referred to a number of other previous ASIC cases, including Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561. In Pegasus, Davies AJ found that Mr McKim, who was the sole director of Pegasus Leveraged Options Group Pty Ltd, operated a managed investment scheme because he was the “living person who formulated and directed the scheme and he was actively involved in its day-to-day operations”. Notwithstanding this, his Honour also concluded while Pegasus Leveraged Options Group Pty Ltd carried on business advising in relation to securities, Mr McKim did not carry on such a business.
In Australian Securities and Investments Commission v Giann & Giann Pty Ltd (2005) 141 FCR 278; [2005] FCA 81, Finkelstein J found that Mr Giannopoulos, who was the sole director and secretary of one of the defendant companies, had contravened s 911A of the Corporations Act by carrying on a financial services business without being licensed to do so. His Honour found that all defendants conducted seminars providing financial advice, either as principal or as employee or they were involved in the seminars. It is relevant to note that the defendants did not oppose the declarations sought by ASIC and there was no discussion about the basis for the finding that Mr Giannopoulos had been carrying on a financial services business. The position was similar in Australian Securities and Investments Commission v Drury Management Pty Ltd [2004] QSC 68 and in Australian Securities and Investments Commission v Manito Pty Ltd (2005) 53 ACSR 56; [2005] FCA 386 the contraventions were admitted by the director and the other defendant company.
In the case of Risqy Limited, Re (No2) [2008] QSC 139, Daubney J applied similar reasoning to Young J in McDougall finding that a director of a company operating an illegal managed investment scheme also operated the scheme. His involvement in the “central business of the scheme” led to the conclusion that the director was carrying on a financial management business without holding a licence.
Interestingly, all of these cases relate to the operation of illegal managed investment schemes and unlicensed activity where individuals, who are directors of the company operating the scheme, have been instrumental in establishing the company and carrying on or supervising the day-to-day operations of the company.
ASIC contended that Mr Coshott’s evidence was to the effect that he was providing advice to clients of Bay Pacific, including GNH. He was the only representative providing advice for Bay Pacific during the relevant period and he was clearly providing a financial service within the meaning of s 766A(1) of the Corporations Act. Section 911A provides that a person who carries on a financial services business must hold an AFSL but is exempt if they provide the services as a representative of a second person (which includes an entity) who carries on a financial services business and has a licence. Relevantly, a “representative” includes an employee or director of the licensee (s 910A). According to ASIC, the existence of the exemption highlights that employees and directors may carry on a financial services business notwithstanding that they are doing so on behalf of or for the benefit of the company.
In oral submissions, counsel for Mr Coshott contended that this would be an impermissible “piercing of the corporate veil”. Bay Pacific was the licensee that was carrying on the financial services business and Mr Coshott was simply its representative, albeit as its sole director and adviser. While his actions could be attributed to Bay Pacific to found a contravention, which was denied in any event, to attribute contravention by the company to Mr Coshott on his own account failed to recognise the legitimate corporate structure in respect of which the financial services business of Bay Pacific was operating and had done for many years.
Mr Coshott is the directing mind of Bay Pacific. He was its representative and it is clear from his evidence that he was the person providing financial advice to clients of Bay Pacific. The question of whether he was carrying on a financial services business in so doing is the key issue in dispute.
I accept ASIC’s contention that the exemption provided under s 911A(2) contemplates that a director who provides financial services on behalf of a company may be carrying on a financial services business. Otherwise, the exemption would serve no purpose. However, I also accept Mr Coshott's contention that to find he was carrying on a financial services business in the circumstances of this case may be inconsistent with well-established principles about corporate liability, as recognised and referred to by Forgie DP in Tweed. While neither party made this submission, there is justification to pierce the corporate veil in certain circumstances. As stated by Young J in Pioneer Concrete Services Ltd v Yelnab Pty Ltd (1986) 5 NSWLR 254, “the courts will, on occasions look behind the legal personality to the real controller”. According to Prof Ian Ramsay and David Noakes in ‘Piercing the Corporate Veil in Australia’ (2001) 19 Company and Securities Law Journal 250, the application of the doctrines is far from clear in the case law. The courts have looked behind the corporate form in cases of fraud or where the corporate structure has been used as a sham. The illegal scheme cases, where courts have found the directors were operating illegal schemes and therefore carrying on a financial services business without holding a licence, are examples of such cases.
This is not such a case. Mr Coshott has been providing insurance advisory services through Bay Pacific for many years. Bay Pacific held a licence, employed staff, entered into contracts with third parties and occupied commercial premises. There is no dispute that Bay Pacific carried on a financial services business. As the sole director of Bay Pacific in the relevant period, Mr Coshott oversaw its activities and, being its sole client adviser for a number of years, provided financial services as a representative of Bay Pacific.
ASIC further contended that it is apparent from the context of the decision in Tweed that Forgie DP did not intend to lay down a general rule that a director of a company cannot also be found to have carried on a financial services business in circumstances where the company carried on such a business and that “the question ultimately falls for resolution on the facts of each case”.
I accept this submission but find that, having regard to the uncontroverted facts about how the business operated, Mr Coshott was not carrying on a financial services business by simply providing advice to clients of Bay Pacific. He provided the advice through Bay Pacific, which was the entity that entered into all relevant contracts, received payment for the advice and employed staff to support the back office business operations. Mr Coshott did not undertake these obligations in a personal capacity and all correspondence provided to the Tribunal was consistent with the notion that Mr Coshott was providing advice or making representations on behalf of Bay Pacific. He received remuneration from Bay Pacific but profits from the business were received by Bay Pacific. Unlike McDougall, Mr Coshott was not the registered proprietor of any business name. He was the directing mind of Bay Pacific but that does not, of itself, evidence that he was personally carrying on its business or any other financial services business. As such, I find that Mr Coshott was not carrying on a financial services business at the relevant time.
Has Mr Coshott nonetheless been involved in a contravention of s 1041G?
Having found Mr Coshott was not carrying on a financial services business when he engaged in the conduct complained of by ASIC, the issue arises as to whether he was involved in a contravention by Bay Pacific.
Section 79 of the Corporations Act provides:
A person is involved in a contravention if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced, whether by threats or promises or otherwise, the contravention; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention.
If Mr Coshott was involved in such contravention, he may be banned from providing financial services under s 920(1)(g) of the Corporations Act.
It is therefore necessary to determine whether Bay Pacific contravened s 1041G. Mr Coshott is the directing mind and will of Bay Pacific. It is uncontroversial that his conduct, on behalf of Bay Pacific, may be attributed to Bay Pacific for the purposes of assessing whether the company contravened s 1041G of the Corporations Act or any other financial services law.
ASIC alleged that Mr Coshott’s conduct was dishonest. To support this contention, ASIC relied on the following:
(a)documents produced by third parties;
(b)the failure of Bay Pacific and/or Mr Coshott to comply with notices;
(c)the lack of documentary evidence to support Mr Coshott’s claims;
(d)the evidence of third parties, including Mr Avramides; and
(e)the inconsistencies in Mr Coshott’s account and evidence about his dealings with GNH, Mr Avramides and others who later queried his claims about the insurance said to be in place for GNH.
ASIC produced six volumes of documents to support their allegations, including 12 statements, and copies of documents summonsed from the Westpac Banking Corporation and Fewin Pty Ltd.
There are three key matters alleged by ASIC to evidence dishonest conduct by Mr Coshott. First, he failed to renew the insurance for GNH from March 2009, without instructions, and subsequently lied about this. Secondly, he issued or caused to be issued false invoices to GNH for insurance cover which did not exist for the periods October 2010 to March 2011 and March 2011 to March 2012, representing that insurance was in place with SRS and ASR during these periods. Bay Pacific was paid premium but it was not remitted to SRS or ASR, nor is there evidence it was remitted to any other third party underwriter. Thirdly, in about March 2012 when it was discovered by the new brokers for GNH that there was no insurance in place with SRS and ASR, Mr Coshott lied about the existence of the cover and created false certificates of insurance which he provided to GNH’s representatives. Mr Coshott has continued to lie about this, including in his evidence to the Tribunal, and has placed any blame with a person called Terry O’Brien, who does not exist.
Mr Coshott relied on his statement dated 11 March 2014, a statement from Ms Moloney and a statement from Mr Demetrios Zisimopoulos, who regularly cleaned the Bay Pacific offices. Mr Coshott’s statement was 20 paragraphs and did not deal with a number of the findings made by the ASIC delegate or the allegations made by ASIC in its Statement of Facts Issues and Contentions, other than in terms of a general denial in response to each allegation. Mr Coshott was cross-examined extensively on his statement, his response to the delegate and his Statement of Facts issues and Contentions and amended document filed in these proceedings.
Mr Coshott gave evidence that the insurance cover for GNH lapsed at Mr Avramides’ request. Mr Avramides denied this and was cross-examined on this issue. Neither resiled from their evidence. While Mr Coshott initially denied sending emails about the lapse, he subsequently agreed, when shown the emails, that he must have sent them. Mr Coshott could not explain why he did not provide confirmation of this to GNH. He contended that there was no motive for him to lapse the cover other than under the instruction of Mr Avramides. There is some force in this submission.
In any event, this matter is not critical to a finding of dishonesty. Mr Coshott’s evidence about why he notified SRS and ASR that the policies would not be renewed is consistent with the written notifications he made to them at the time. While it is curious that Mr Coshott did not confirm this in writing to GNH, the fact that he did not do so is not evidence of a dishonest design. The inconsistency in the evidence between Mr Coshott and Mr Avramides and their different recollections does not compel a finding that one or other should be disbelieved. The most likely explanation is that there was a misunderstanding between Mr Coshott and Mr Avramides about this. Mr Coshott may have wrongly concluded that Mr Avramides did not wish to proceed with insurance cover for the period of the proposed renovations. Conversely, Mr Avramides may have assumed cover had continued.
The more critical issue is the allegation that false invoices were created for GNH for the 2010/11 and 2011/12 policy years. There was no insurance in place for these years and while Mr Coshott expressed doubt about this when he gave evidence at the hearing, other evidence provided to the Tribunal, which was not contradicted or in contest, was clear. The evidence of officers from SRS and ARS was that no insurance cover had been renewed or insurance premium received in respect of GNH since March 2009. The evidence from officers of Lloyd's of London was that Bay Pacific was not authorised to provide insurance and that there was no record of insurance cover for GNH for the relevant policy years. There was no evidence, apart from statements made by Mr Coshott when he was being cross examined about a Singaporean underwriter, that insurance was arranged through any other party. The question is whether Mr Coshott was involved in the issue of those invoices and, more particularly, whether he knew them to be false at the time of the issue. Mr Coshott acknowledged that he was aware of the invoices but did not believe they were false. He relied on Mr O’Brien but according to ASIC, there was no evidence Mr O’Brien existed.

Mr Coshott gave evidence that he employed Mr O'Brien as a sub-contractor of Bay Pacific from about July 2010 and that he worked with Bay Pacific until about October 2011. Mr O'Brien worked mainly during evenings and weekends. According to Mr Coshott, Mr O’Brien told him it would be difficult to organise insurance for GNH because the hotel was in a state of disrepair but he could source insurance through a Singaporean underwriter. Mr Coshott said he was confident insurance had been arranged with the Singaporean underwriter and remembers Mr O’Brien telling him he would need to organise the payment for the insurance urgently. When questioned about these matters, Mr Coshott said he could not find records to corroborate this as all records for GNH had been destroyed by about March 2012. He recalls seeing emails referring to the Singaporean underwriter on Mr O’Brien’s laptop computer but could not find records to show how moneys had been transferred to the underwriter. Mr Coshott maintained that insurance must have been in place with the Singaporean underwriter but near the end of the second day of his cross examination, after being questioned about the certificates of insurance said to have been provided by him to GNH under cover of letter date 15 June 2011, he conceded these certificates may have been false.
Mr Avramides denies that Mr Coshott discussed any of these matters with him. There was no evidence to the contrary from Mr Coshott and relevantly there was no reference to a Singaporean underwriter or any discussion with Mr Avramides about this in Mr Coshott’s statement.
I am satisfied that Mr O'Brien existed and that he worked with Bay Pacific for approximately six months, possibly longer, from about July 2010. In coming to this view, I accept the evidence of Ms Moloney and Mr Zisimopoulos. Both were cross examined and were clear in their evidence. ASIC contended I should not accept the evidence of Ms Moloney because she had a close long-standing association with Mr Coshott and there was evidence they had been in a relationship a number of years ago. In my view, this does not diminish Ms Moloney’s evidence. She was frank about her previous relationship with Mr Coshott and while it was clear she supported him, Ms Moloney gave evidence in a clear and forthright manner. She has no reason to lie and I accept her as a witness of truth. Similarly, Mr Zisimopoulos has no interest in this matter and no reason to lie. His recollection was clear. He had been introduced to a man called “Terry” and had observed him working in the offices from time to time.
However, the fact that Mr O’Brien existed and was working at Bay Pacific from about July 2010 does not of itself corroborate Mr Coshott’s evidence, first, that insurance for GNH was arranged through a Singaporean underwriter by Mr O'Brien and, secondly, if not, Mr O'Brien was to blame for false invoices. Mr Coshott’s contention was that there was no dishonesty on his part because he honestly believed that insurance for GNH was in place and that this remained his view until the second day of his cross examination at the hearing ( at T312).
I do not accept the critical aspects of Mr Coshott’s evidence. He was not a credible witness. He was inconsistent, often did not answer the question asked of him and in a number of material matters, his evidence was in direct conflict with the evidence of third parties and documents produced to the Tribunal.
The invoices issued in November 2010 refer clearly to SRS and ASR, not a Singaporean underwriter. This must have been apparent to Mr Coshott who said he closely supervised Mr O'Brien and looked at, or would have looked at, all documents issued by Mr O'Brien. The fact that these invoices were issued referring to SRS and ASR is inconsistent with Mr Coshott’s evidence that he had a conversation with Mr O'Brien about the Singaporean underwriter after July 2010. If Mr Coshott had had such a conversation, he would have known that these invoices were false. If he did not have such a conversation, his evidence to the Tribunal was untrue. The third possibility is that, despite Mr Coshott’s evidence that he would have carefully reviewed the invoices, he did not do so and did not notice the reference to SRS and ASR. After initially giving evidence that he could not agree the November 2010 invoice for the business cover insurance was false, Mr Coshott conceded that it must have been “incorrect” when he was shown the reference to SRS on the invoice. When asked to explain this, Mr Coshott said “I either didn’t look at it or I didn’t see it to begin with” (at T243). This is but one example of many instances when Mr Coshott gave evidence of a matter but later resiled from this evidence under cross-examination when shown documents.
I am not satisfied that Mr Coshott had conversations with Mr O'Brien about a Singaporean underwriter or, more particularly, that he believed insurance was in place with a Singaporean underwriter. Mr Coshott did not mention this to ASIC investigators at any stage, he did not refer to this in response to the issues raised by the ASIC delegate and he did not raise this in his statement or in his initial or Amended Statement of Facts, Issues and Contentions filed in these proceedings. The first time this issue was raised was when Mr Coshott gave evidence at the hearing. When pressed to provide further details about the Singaporean underwriter and the arrangements made, Mr Coshott was unable to give any details, including about how monies were transferred to the underwriter. Mr Coshott’s evidence was unconvincing, as demonstrated by the following (at T246-248):
You identify that the money was sent to a nominated account in Singapore?‑‑‑Well, it had come out of that account, and I remember that’s how it was done, because Terry said: “I have to take this up, I've got to get it electronically transferred into this account. It has got to go today, otherwise” – – -
So Terry said that. So we’re not talking March 2012?‑‑‑No, I'm talking way back when.
So when did you – how did you become aware that this amount, that was paid by Grand National, was sent to Singapore?‑‑‑Yes.
Can you describe that?‑‑‑All I knew was back in 2011.
Yes. So how did you become aware? Can you describe that to us in more detail?‑‑‑Well, I had to sign the cheques to take the money out.
So a cheque was – so a cheque was drawn on the account, you’re saying?‑‑‑On the banking account, yes. To go, and then the money had to be electronically – – -
This is back in March 2011 – – -?‑‑‑Yeah, it would’ve been March.
And a cheque was drawn on the account of Bay Pacific?‑‑‑Yes, and the remittance advice.
To an entity in Singapore?‑‑‑Sorry?
To an entity in Singapore?‑‑‑Yeah, the bank account number we had.
Okay, to a bank account in Singapore. So have you checked your records? So if we look at your records in March 2011, will we find a debit in that account to a Singapore entity? If it was a cheque?‑‑‑Well, it shows as a payment. It won’t show on the statement whose it was.
Well, can you just look at that, then? Could you call up page 78 on your bank accounts, please?‑‑‑Yes. Yes. Yes. I take it that it was a cheque. I don’t think it was an EFT. Seventy-eight.
SENIOR MEMBER: It was a cheque? You said it was a cheque. You said you recall writing a cheque?‑‑‑Yes, well, I'm surmising it would be a cheque or an EFT. I used – did everything by cheque. But – – -
So you recall signing the cheque, you say?‑‑‑I know the payment was organised. I'm just surmising.
But do you know that it was a cheque – – -?‑‑‑Nobody would have done – – -
Or are you just speculating?‑‑‑Speculating.
So, it may have been a cheque, it might have been an electronic – – -?‑‑‑Well, there would have had to be a debit, coming out of the brokering account, for those amounts.
Yes?‑‑‑The corresponding for it all to balance.
Yes?‑‑‑At the end of the month. And balance in our audits.
Okay?‑‑‑So there’s definitely got to be funds coming out. Otherwise you won’t balance. We did trial balances every month.
But do you specifically remember – – -?‑‑‑Sorry?
Do you remember, because you say you had this conversation with Terry – – -?‑‑‑Yep. That we had to get the money into this account.
And you were asked whether you looked at your accounts, and you said “Yes, it went to Singapore”?‑‑‑Yes. It was to go to a Singapore account, yes.
No, you said it went to Singapore, and I think you then said – I might be wrong, but I think you said – “I wrote a cheque, I remember signing the cheque”?‑‑‑That’s – no.
That’s what you said?‑‑‑Well, that I'm not too sure about.
So you don’t remember?‑‑‑No.
MS STERN: You don’t actually remember any of this, do you, Mr Coshott?‑‑‑Sorry?
You don’t remember this conversation at all, do you?‑‑‑What?
Well, any conversation with Terry O’Brien about you sending a cheque to Singapore?‑‑‑Yes, I do. I remember he said, “We’ve got to get this across to him, otherwise we won’t go on risk. Got to get the money over to him quick smart. And it’s got to be done directly into their account in Singapore. Here’s the account details.”
Did you have to send it off in Singapore dollars?‑‑‑I have no idea. No, it would’ve been paid in Australian dollars, I would suspect.
Mr Troy Hams, General Insurance Manager with Cresmont, provided a statement in support of ASIC’s case. According to Mr Hams, he had a conversation with Mr Coshott about the insurance cover for GNH in March 2012. Mr Coshott did not refer to a Singaporean underwriter in this conversation and told him that SRS and ASR were the underwriters for the GNH cover. Mr Coshott denies having this conversation or indeed any conversation with Mr Hams. Mr Hams prepared a file note shortly following the conversation with Mr Coshott recording the matters discussed. This file note is attached to his statement filed in these proceedings. He was cross-examined and did not resile from his evidence. Conversely, Mr Coshott was adamant that he had no such conversation with Mr Hams.
Mr Coshott did not refer to the Singaporean underwriter in his discussions with Mr Carter when took over as Mr Avramides’ broker and began his investigations in March 2012. Mr Coshott also denies these discussions occurred. Mr Carter deposes to a conversation with Mr Coshott in which he asked Mr Coshott about who the current underwriters for GNH were. He gave evidence that Mr Coshott said to him words to the effect, “I don't know. I will have to go back to my file”. Mr Carter was cross examined on this issue. He did not resile from his evidence and his recollection was clear.
I prefer the evidence of Mr Carter and Mr Hams to the evidence of Mr Coshott on these matters. Mr Hams and Mr Carter are third parties with no apparent interest in the outcome of this matter. They investigated the GNH insurance at the request of Mr Avramides after Mr Avramides had already retained Cresmont to advise on insurance for GNH. There is contemporaneous documentary evidence to support their statements, such as emails and file notes. Mr Coshott is either mistaken in his evidence or not being truthful. For the reasons later outlined in more detail, I have concluded the latter.
In a statement made to ASIC in November 2012, Mr Avramides gave evidence about a conversation he had with Mr Coshott on or about 7 March 2012. This statement was tendered in these proceedings and Mr Avramides was cross examined on this evidence. According to Mr Avramides, he approached alternative brokers to provide quotations for his insurance. He had a discussion with Mr Coshott about this in which Mr Coshott was abusive. He said he no longer wanted to work with the Avramides family. Just after this conversation, Mr Avramides received the letter from Bay Pacific dated 8 March 2012. This letter contained two representations. First, there was a representation that GNH had insurance in place with two current insurers. Secondly, there was a representation that those insurers had advised GNH no longer met their underwriting criteria.
In contrast, Mr Coshott’s statement records that Mr Avramides telephoned him in about February or March 2012 “seeking continuation of the insurances for Grand National Hotel” and Mr Coshott “informed him that it was not available”. In cross examination, Mr Coshott agreed that this conversation related to Grand National Concierge and not GNH and that his statement was incorrect, as illustrated by the following passage of transcript (at T219-220):
Now is that true or untrue that he rang you in March 2012 asking you to continue his insurance for Grand National Hotel?---It wasn't the Grand National Hotel, it was the Grand National Concierge, sorry.
So this is not true what you have written here?---Well, it's part and parcel, it's the Grand – all of Alex's anyway, and that was still back in January or February and he hadn't paid it. And that's all – that’s the account had gone.
So this sentence here is untrue to the extent – – -?---Yes, well in it being absolutely precise it was in relation to the Grand National Concierge.
And so you say "being absolutely precise"?---Yes.
But in fact that's a wholly different company, you agree?---Yes, but obviously it's tied in. It's still Mr Alex Avramides and it works in conjunction with the Grand National.
And why was it that insurance wasn't available for Grand National Concierge?---Because I didn't want to handle it, because the rest of the account had gone. It wasn't available, I just – he had, since January or something, to pay the thing. He hadn't responded to any notices or any messages that may have been left. I mean, all out of the blue – do you want to know the real background of it, the full background?
Could you just answer the questions if you will?---Okay.
Why is it that there was not available insurance?---Because I refused to handle his insurance.
You refused. So when you said it wasn't available you were really meaning "I'm not going to insure you any more"?---That's right, yes. "You didn't pay it when you should have so good bye, I'm not reinstating it and not doing it." Yes.
Both representations in the letter of 8 March 2012 were incorrect, or at the least misleading, based on Mr Coshott’s own evidence at the hearing. When cross-examined about the statement that there were “two current insurers”, Mr Coshott sought to justify this by saying that there would have been two Lloyd's syndicates in place and therefore two insurers. His evidence was unconvincing given he had identified one Singaporean underwriter as providing the insurance for GNH.
When questioned about the representation that the GNH operations no longer met the underwriting requirements of the insurers, Mr Coshott’s response was vague and unconvincing as illustrated by the following passage (at T202-203):
Let's look at this. Now, you're saying that, "Your two current insurers have advised that your operations no longer meet their underwriting criteria." No one ever advised you of that, did they?‑‑‑Yes.
Who advised you of that, Mr Coshott?‑‑‑The underwriter. When we first placed these insurances, if you read what was – – -
Who, who, which underwriter said to you, "Hello, Ronald Coshott, I will no longer insure these people”?‑‑‑That was the – when we managed to get it placed in March – March – March 11 to March 12 it was done as, what we call, the accommodation risk only at a minimum and deposit premium – in other words, it couldn't be...
Where is the evidence of this, Mr Coshott?‑‑‑It's – you've got it in other paperwork here where it said – – -
Where's the evidence?‑‑‑ – – – it was placed on an accommodation basis only and would not be able to be renewed or to have the cover extended past the expiry date.
You have not one document that says to you that whoever was underwriting, on your understanding, these policies would not offer insurance for renewal, did you?‑‑‑No, but it was placed on that and Mr O'Brien told me about it and there it was in writing and that was the only way we could get it placed.
SENIOR MEMBER: So where is it in writing? Where was it in writing?‑‑‑Just in our details here. It didn't come from the insurer but that was the condition of it.
There's a document that records that, you say?‑‑‑No, it was our – the advice from the facility that it was being done as a personal favour – – -
Mr Avramides denied being told by Mr Coshott that there was a problem in sourcing insurance for the Hotel, either in 2009 or after this. According to Mr Avramides, he was never advised that insurance was not being provided by SRS and ASR.
I accept Mr Avramides evidence about these matters. I found him to be clear and frank in giving his evidence. In contrast, Mr Coshott’s evidence was vague and equivocal. Furthermore, Mr Coshott acknowledged during cross examination that the reason why he had sent the letter of 8 March 2012 was because he no longer wanted to provide insurance for GNH. Files for SRS and ASR were produced to the Tribunal and there was no evidence in those files about either underwriter declining to provide cover for GNH. In summary, the preponderance of this evidence about the continued availability of cover for GNH is inconsistent with Mr Coshott’s statement and the second representation made in the letter of 8 March 2012.
The letter of 8 March 2012 resulted in a series of investigations. ASIC alleges that Mr Coshott’s response to these investigations was dishonest and that he created false certificates of insurance for the 2010/2011 and 2011/2012 policy years.
Mr Coshott responded to Mr Carter's email of 23 March 2012 raising concerns that there was no cover in place with either SRS or ASR by stating that GNH had cover through “a facility we have into Lloyd's underwriters”. In paragraph 83 of his Statement of Facts Issues and Contentions, Mr Coshott contended that Mr O'Brien informed him he had “obtained insurance directly through Lloyd's”. When cross-examined about why Mr Coshott had contended Bay Pacific had a facility “directly through Lloyds”, Mr Coshott conceded this was wrong (at T290) and when cross examined why he did not mention the Singaporean underwriter and why he had suggested there was a facility with Lloyds, Mr Coshott gave evidence as follows:
You were asked details of the current policies. Now, I just want to go back to this because it’s in very similar terms to what you said or was said in your instructions in that statement of facts, issues and contentions. But what you have said in the first sentence of your response, which is at the bottom of page 25, is, “Through a facility we have in London into Lloyds Underwriters.” Now, Mr Coshott, even on your most recent account, which is that you had a facility in Singapore into Lloyds Underwriters, you agree – – -?---In London, yes.
- – – with me that this is blatantly untrue?---I would say it’s nit-picking on your behalf. The intention is right.
What do you thinking I’m nit-picking about, Mr Coshott; can you help me with that?---Well, we had a facility – – –
What facility did you say you had in London?--- – – – to Lloyds in London via an agent in Singapore. I mean, it’s still going in the right spot. Because I don’t want to go into the ins and outs at (indistinct), it’s just saying, it’s basically saying it’s being underwritten by Lloyds and that’s all there is to it, which was the fact of the matter.
And does – – -?---The way we accessed Lloyds is none of his business anyway. It’s a commercial practice of ours; you don’t give away your own ways that you’re doing things.
You said, “We didn’t want to go into the ins or outs of it”?---Right.
What didn’t you want to go in the ins and outs? Is it that you didn’t want to disclose – – -?---No, it wasn’t.
- – – that this was through Singapore, which wasn’t authorised?---It is authorised, it’s not unauthorised.
Why did you say, Mr Coshott – – -?---It was the – – –
You knew that this was an important question that was being asked of you, in a context where it was understood that your client and your family friend of – obviously not Mr Avramides for 50 years, but the family for 50 years, was concerned that they were not insured. And what you said is, “Through a facility we have in London.” Now, you were deliberately – – -?---With London.
- – – misrepresenting the truth, even on your most recent account, weren’t you, Mr Coshott?---Well, it should have said, “with London” but – – –
No, it should have said, “in Singapore,” shouldn’t it?---No.
Why not?---Because Lloyds is in London.
But aren’t you saying to Senior Member Redfern that you had this undisclosed facility in Singapore?---Yes.
Into Lloyds?---Yes.
So that’s what you should have said, if what you’re saying now is to be believed?---No, I shouldn’t. The underwriter is Lloyds, and that’s exactly what – – -

This evidence was confusing and unconvincing. If there was a Singaporean underwriter and Mr Coshott was satisfied about this he would have simply referred to the Singaporean underwriter in his correspondence with Mr Carter. The fact that he did not do so and did not raise the issue until his cross examination in these proceedings supports ASIC’s contention that this was a recent fabrication by Mr Coshott to explain inconsistencies between his evidence and the documents.
Mr Coshott responded to Mr Avramides, who was also requesting details of the insurance cover at this time, by emailing a scanned copy of letters dated 15 June 2011 attaching certificates of insurance for public and business liability insurance. Mr Avramides said he did not receive the letters in June 2011 but could not discount the possibility the letters had been received at GNH. As already noted, the certificates represented that the insurance was “Lloyd’s Certificate of Insurance effected through Bay Pacific (Insurance Brokers) Pty Ltd” as the “Coverholder”. The letters and certificates did not refer to SRS or ASR but used the same policy numbers as previously used for those underwriters and, in the case of the business insurance, reproduced a seal which was clearly false. It was the same as the SRS seal with “SRS” removed. Mr Coshott said he had obtained copies of these certificates from the Lloyd’s file because the GNH file had been destroyed by March 2012.
After being taken to these certificates during his cross examination, Mr Coshott gave the following evidence (at T310):
Okay. So when you had looked at the letter that you say you signed in June 2011, did you look at the enclosures?‑‑‑Yes.
So you would have seen that document headed Lloyd's Certificate of Insurance that we were just talking about?‑‑‑Yes, I would have.
Did you read it?‑‑‑The important parts I would have checked on, the sum insured, the premiums and that.
What would you consider to be the important parts?‑‑‑The rest of the format looked exactly what I have been accustomed to seeing. I would have had a quick cursory look at the standard – you know, the normal form, the templates, same as what we do, and just checked the sum insured, any special conditions, yes.
So it looked the same?‑‑‑Yes. The same as what I was accustomed to seeing from other underwriting agencies with Lloyd's.
It says that Bay Pacific is the cover holder and you said if you had have – that would concern you?‑‑‑That – yes, that – but I don't know whether it would strike me as being – – -
All right. I took you – – -?‑‑‑It should have been the contact if anything was going to go on it.
Should be what?‑‑‑Bay Pacific should have been shown as the contact.
Yes. But does that now suggest to you that there is – just what we have shown you, does that suggest to you that this is a false document?‑‑‑I'm beginning to come to that perhaps, yes.
Beginning to come to that feeling just now?‑‑‑Yes. Yes.
Not before? Just now?‑‑‑No, just now, that there is a possibility.
And then at T311, as follows:
SENIOR MEMBER: Mr Coshott, your evidence yesterday morning, and we don't have the transcript, but it's my recollection that your evidence was that you actually said, "I believe there was insurance in place"?‑‑‑Yes.
That was your belief until yesterday?‑‑‑Well, it's still my belief and – – -
That there was insurance in place?‑‑‑Yes, still – – -
From October 2010 to March 2012?‑‑‑Yes.
That was your belief yesterday?‑‑‑Correct, yes.
Is that still your belief?‑‑‑Well, it was up until now.
Given that the certificates clearly state that Bay Pacific is the “Coverholder” and that this was a key issue subject to scrutiny and in dispute during the ASIC investigation and in these proceedings, it is inconceivable that the first time it ever occurred to Mr Coshott that these certificates were false was while being questioned by Counsel for ASIC. I therefore do not accept that Mr Coshott was being truthful when he gave his evidence.
Mr Woods was provided with these certificates during his investigation on behalf of Lloyd’s of London and sent an email to Mr Coshott on 29 March 2012 querying the use of the term “Coverholder” by Bay Pacific in the certificates. Mr Coshott responded by letter dated 30 April 2012 and did not refer to any Singaporean underwriter or provide any explanation as to how Bay Pacific’s name had appeared on the certificate. In fact he stated that he was “at a loss to explain” this. When questioned about his response, Mr Coshott gave the following evidence (at T312):
And this is an email from Mr Wood to yourself and you see Mr Wood has identified himself at the bottom of the page as the regulatory risk executive or a regulatory risk executive at Lloyd's International Regulatory Affairs?‑‑‑Yes.
So you appreciated that this was an enquiry being put to you by someone who was concerned with regulatory risk at Lloyd's?‑‑‑Yes.
And you knew this was a very serious matter, didn't you?‑‑‑Well, I knew it was a matter that had obviously been brought to someone's attention.
I beg your pardon? Could you – did you consider this was a serious matter, Mr Coshott?‑‑‑Well, let me read it and I will tell you. Right. I have read that.
Okay. Now, you agree you received this letter on 29 March 2012? Email, I should say. It's sent to your email address, isn't it?‑‑‑No, I can't in particular remember receiving this particular one. I know we had received one or maybe two at some time but I don't think it was – I don't think it was in this text.
Okay. Let's just go through it. The third paragraph here says that you have described yourself as the cover holder. He has checked his systems and you are not an accredited broker, cover holder or have any commercial relationship with Lloyd's. He wants clarification. Now, you say:
Yes, you are right. I'm not a cover holder. Bay Pacific is not a cover holder. That is completely wrong.
Do you agree with me?‑‑‑Sorry?
Well, in the paragraph 3 where he has raised the fact that you have described to – – ‑?‑‑‑Not a cover holder, yes. Yes.
You agree that the clarification in this regard is, "Mr Wood, you are correct. Neither me nor Bay Pacific is a cover holder"?‑‑‑Yes.
When issued with notices by ASIC to produce documents relating to GNH, Mr Coshott simply did not produce records and at no stage did he tell ASIC that those documents had been destroyed. The first time this was raised was at the hearing when Mr Coshott gave evidence to the Tribunal that his records for GNH were destroyed some time prior to March 2012, probably mistakenly. He therefore could not provide any documents to evidence the various transactions but denied that he had created the false certificates of insurance. However, Mr Coshott gave evidence that he would have sent the certificates, together with the letters of 15 June 2011, to GNH on or about the date of the letter. If Mr Coshott sent the letter to GNH on or about that date, he must not have examined the certificates of insurance closely as he would have noticed the incorrect reference to Bay Pacific being the “Coverholder”.
Mr Coshott's response to Mr Carter, Mr Avramides, Mr Wood and later ASIC was inconsistent with his evidence to this Tribunal that insurance for GNH was in place through a Singaporean underwriter, that he honestly believed this was the case and had nothing to hide. His evidence to this Tribunal was also inconsistent, vague and at times argumentative. Mr Coshott could either not explain or was unconvincing in respect of important contentions made by him about the alleged inability to obtain insurance for GNH, his alleged discussions with Mr Avramides about this, insurance with the Singaporean underwriter and his response to various investigations and queries from third parties about these matters from March 2012. As already noted, Mr Coshott’s evidence on a number of these matters was contradicted by the evidence of third parties or documents.
It is possible that Mr O'Brien committed a fraud, created false invoices and told Mr Coshott there was a Singaporean underwriter. If this had been the case, Mr Coshott would have identified the fraud during the course of his investigations in March 2012 and should have identified that the certificates were false, which even a cursory examination would have revealed. He could have responded to Mr Avramides, Mr Carter and Mr Wood that he was also concerned about these matters and was investigating the situation.
While it is difficult to understand why Mr Coshott, who had a long-standing association with the Avramides family and no apparent history of fraud or breach of the Corporations Act, would commit such a fraud, it is also difficult to reconcile Mr Coshott's evidence and insistence that there was insurance with a Singaporean underwriter in place with other aspects of the evidence.
Findings on dishonesty
I find that there was no insurance in place with a Singaporean underwriter and that Mr Coshott did not believe this to be the case. I do not come to this conclusion lightly and base this finding on the following:
(a)the fact that Mr Coshott made no reference to a Singaporean underwriter in any of his dealings with third parties about the issue or in his written evidence and statements in these proceedings;
(b)there were no records evidencing that insurance was effected for GNH through a Singaporean underwriter; and
(c)Mr Coshott’s evidence to this Tribunal about the alleged arrangements with the Singaporean underwriter was imprecise, in some cases inconsistent and generally unconvincing.
Mr Coshott’s explanation as to why he did not raise this matter prior to his cross examination was not credible. This was an important issue that could have explained Mr Coshott's position. It is inconceivable that Mr Coshott could have failed to appreciate the significance of this. Mr Coshott later attempted to blame his lawyers for this and said that he provided them with all information.
I also find that Mr Coshott's responses to the investigations and queries from March 2012 about the insurance for GNH were inconsistent and, in some cases, misleading. Mr Coshott’s letter dated 8 March 2012, particularly insofar as it was alleged insurers had declined to provide coverage for GNH for the following year, was false. Mr Coshott’s statement to Mr Hams was inconsistent with his evidence that a Singaporean underwriter had provided insurance. Mr Coshott accepted that SRS and ASR did not provide insurance for the 2010/2011 and 2011/2012 policy years but he represented otherwise to Mr Hams.
I find that the invoices of November 2010 and the certificates of insurance said to be dated 23 April 2011 were false. Mr Coshott denies creating the invoices although he accepts that he probably reviewed those invoices. He denies creating the false certificates of insurance and Ms Moloney states that Mr Coshott would not have had sufficient technical skills to prepare these documents. ASIC did not interrogate the Bay Pacific computer records, which may have resolved this controversy, although it is possible the records were already compromised by the time ASIC commenced its investigations.
Having regard to all of the evidence, I cannot discount the possibility that a man called Terry O’Brien may have created false invoices and the false certificates of insurance. I therefore cannot find, having regard to the principle in Briginshaw and the comments of the Full Court in Sullivan, that Mr Coshott created the false documents or was aware of their falsity at the time of their creation. However, I am satisfied Mr Coshott became aware of their falsity in or about March 2012 and sought to cover up the issue by making false and misleading statements to third parties and to the regulator. There is no other plausible explanation for Mr Coshott providing inconsistent and implausible evidence to this Tribunal and for making these statements. There is insufficient evidence to establish Mr Coshott created the false certificates of insurance in March 2012. It is possible these documents were created in about April or June 2011, although it is likely he saw them because a signature that is said to be his signature is on each of the certificates. Mr Coshott does not deny this.
I further find that Mr Coshott's letter of 8 March 2012 contained a false representation that insurance could not be obtained for GNH in circumstances where Mr Coshott did not know this to be the case. He had made no enquires at this time. Making this false representation was deliberate and dishonest, having regard to Mr Coshott’s evidence that the reason he sent the letter of 8 March 2012 was that he no longer wanted to insure GNH or the Avramides family. I accept the evidence of Mr Avramides that Mr Coshott was angry he was considering using another broker and that Mr Coshott knew this when he sent the letter of 8 March 2012. I also accept Mr Avramides version of the conversation which he says took place on or about 7 March 2012.
The conduct of Mr Coshott was dishonest according to the standards of ordinary people and Mr Coshott must have appreciated this to be so. His conduct can be attributed to Bay Pacific and I therefore find that Bay Pacific engaged in dishonest conduct in relation to a financial product or service in the course of carrying on its financial services business of insurance brokerage and advice.
It was contended that Mr Coshott could not be involved in the contravention by Bay Pacific because s 79 of the Corporations Act contemplates two streams of conduct. First, the conduct of Bay Pacific could not be attributable to Mr Coshott personally and, secondly, s 79 contemplated conduct additional to, rather than identical with, the conduct constituting the contravention.
I do not accept this contention and in this regard, I accept the submissions of ASIC. As contended by ASIC, for the Tribunal to find that Mr Coshott was involved in the contravention of Bay Pacific, I would have to find that Mr Coshott intentionally participated in the contravention (Yorke v Lucas (1985) 61 ALR 307 at 310; ASIC V PFS Business Development Group Pty Ltd (2006) 57 ACSR 553 at [309]) and that he had actual knowledge of the essential matters going to make up the contravention, which knowledge must have come about the time of the contravention (ASIC v Australian Investors Forum Pty Ltd (No2) (2005) 23 ACLC 929 at [114]-[115]). Mr Coshott was the sole director of Bay Pacific and was responsible for providing advice to clients about their insurance cover and for its day-to-day operations. On his own admission, Mr Coshott closely supervised all staff, including Mr O'Brien.
Having regard to my findings about Mr Coshott's participation in the contravention and his knowledge at the relevant time, I also find that he was knowingly involved in the contraventions of Bay Pacific. There is no authority to support Mr Coshott’s proposition that conduct evidencing involvement in a contravention needs to be additional to the conduct which is the subject of the contravention. While Forgie DP found that the contraventions of the company could not be attributed to its director in Tweed, this case is not authority for the proposition that a director, who is the controlling mind of a company and causes the company to contravene legislation, cannot be knowingly involved in the contravention.
Accordingly, I find that the discretion to ban Mr Coshott was enlivened under s 920(1)(g) of the Corporations Act.
HAS MR COSHOTT CONTRAVENED ANY OTHER FINANCIAL SERVICES LAW?
Section 1041H(1) provides:
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.
Unlike s 1041G, there is no need for the person to be carrying on a financial services business for there to be a breach of s 1041H, merely that the person who is alleged to have engaged in conduct which is misleading or deceptive or likely to mislead or deceive did so in relation to a financial product or financial services.
Mr Coshott made a number of representations to GNH, Mr Avramides, Mr Carter and Mr Wood. Those representations were to the effect that Bay Pacific had organised insurance cover for GNH for the 2010/2011 and 2011/2012 policy years. The representations were made over a sustained period of time. The representation was first made at the time the November 2010 invoices were issued and then when the premium funding was submitted to GNH in May 2011. While it was unclear whether Mr Coshott personally provided the premium funding documentation to Mr Avramides, it is clear that he authorised the document to be issued. On 8 March 2012, there were further representations made by Mr Coshott to GNH that current insurance policies were due to expire on 31 March 2012 and that the insurers were refusing to renew those policies. Finally, there were representations made from March 2012 that GNH had insurance cover in place for the 2010/2011 and 2011/2012 policy years.
The representations in relation to the November 2010 invoices and subsequent premium funding will only be misleading and deceptive if Mr Coshott was of the view that there was no insurance in place for GNH at the time those documents were issued. Similarly, the representation in the letter of 8 March 2012 that current insurance policies were due to expire on 31 March 2012 will only be misleading and deceptive if Mr Coshott did not believe at the time he sent the letter that there was current insurance in place for GNH.
I have found there is insufficient evidence to conclude that Mr Coshott knew or ought to have known that there was no insurance in place for GNH for the 2010/2011 and 2011/2012 policy years at the time the November 2010 invoices were created and issued and at the time the premium funding was arranged. As such, I do not find there has been a breach of s 1041H in respect of this conduct. It is unclear from the evidence whether Mr Coshott knew there was no insurance with SRS and ARS at the time he sent his letter of 8 March 2012. He subsequently contended this related to other insurance arranged through a Singaporean underwriter, which, for the reasons previously outlined, I do not accept. There was little evidence from Mr Coshott as to how the insurance for GNH was reactivated after it was lapsed in March 2009. Because Mr Coshott did not give a full and frank account of this, it is difficult to conclude when he came to the view that there was no insurance in place. However, his representation that insurers were refusing to renew those policies was misleading and deceptive, regardless of whether he knew there was current insurance, because it is clear from Mr Coshott’s evidence that he had not made enquiries with the current insurer about whether the policy could be renewed.
The representations made from March 2012 that GNH had insurance cover in place for the 2010/2011 and 2011/2012 policy years were misleading and deceptive because Mr Coshott knew or must have known that there was no such insurance in place at this time.
Accordingly, I find that Mr Coshott contravened s 1041H of the Corporations Act and that the discretion to ban Mr Coshott is thereby enlivened under s 920(1)(e) of the Corporations Act.
IS THERE REASON TO BELIEVE MR COSHOTT IS NOT OF GOOD FAME OR CHARACTER?
The question of whether there is an absence of good fame or character has been considered a number of professional misconduct cases. As noted by the Court of Appeal (Beazley J, McColl JA and Hoeben J) in Prothonotary of the Supreme Court of New South Wales v Alcorn [2007] NSWCA 288 at [57], the absence of good fame or character “is a matter that falls to be determined at the time at the hearing”. The “good character” must be relevant to the purpose for which the complaint is entertained (Kirby P in McBride v Walton [1994] NSWCA 199). Dishonest conduct was said to be incompatible with the more enduring moral qualities denoted by the expression good fame and character relevant to admission to the Bar (Dixon J in Re Davis (1947) 75 CLR 409 at 420; [1946] HCA 53). The role of a financial adviser is a fiduciary relationship (Rares J in Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in Liq)
[2012] FCA 1028) and dishonest or misleading and deceptive conduct when dealing with a client is equally incompatible with the role and obligations of a fiduciary.

Having regard to my findings that Mr Coshott has engaged in dishonest conduct (which can be attributed to Bay Pacific), has been knowingly concerned in the contravention of s 1041G of the Corporations Act by Bay Pacific and has himself contravened s 1041H of the Corporations Act, I also find that there is reason to believe Mr Coshott is not of good fame or character. There is no suggestion that Mr Coshott has reformed or that he admits and is remorseful about his conduct. This finding is reinforced by my findings that Mr Coshott was not full and frank in giving his evidence before this Tribunal, nor in his dealings with the regulator, ASIC.
Mr Coshott may therefore be banned under s 920(1)(d) of the Corporations Act.
IS THERE REASON TO BELIEVE MR COSHOTT IS LIKLEY TO CONTRAVENE A FINANCIAL SERVICES LAW OR THAT HE IS NOT COMPETENT TO PROVIDE A FINANCIAL SERVICE OR FINANCIAL SERVICES?
Mr Coshott submitted that when considering whether there was “reason to believe” he would be likely to contravene a financial services law, there needed to be relevant prospects that he would again provide financial services (Tweed at [151]). Mr Coshott was no longer working in the insurance industry and had retired. As such, there could be no such reason to believe he was likely to contravene. ASIC did not specifically address this issue in its written submissions other than to note that Mr Coshott showed a “surprisingly cavalier attitude to the keeping of records” and that this, together with other aspects of Mr Coshott’s evidence, would give the Tribunal reason to believe he was not competent to provide financial services for the purposes of s 920A(1)(da) of the Corporations Act.
There was uncontradicted evidence from Mr Coshott that he does not intend to provide financial services in the future given he has retired. It therefore seems unlikely that Mr Coshott will contravene in the future. However, it was ultimately unnecessary to determine jurisdiction to enliven the discretion on this basis and neither party addressed this case in any detail. As already noted, the critical issue in dispute was whether Mr Coshott had acted dishonestly or had engaged in false and misleading conduct.
On the question of whether there was reason to believe that Mr Coshott was not competent to provide financial services, I accept ASIC’s submission that Mr Coshott’s attitude to record keeping, as evidenced by his approach to keeping records in respect of the GNH insurance, did not comply with obligations under s 286 of the Corporations Act. Section 286 provides that a company must keep written financial records that “correctly record and explain its transactions”. The records must be kept for seven years. There are similar obligations under the taxation legislation. Furthermore, s 912A of the Corporations Act provides that a financial services licensee must “do all things necessary to ensure that financial services covered by the licence are provided honestly, efficiently and fairly”.
Maintaining records that evidence or explain transactions, advice given to clients and communications with third parties about insurance would be critical to adequate record keeping for an insurance broker. According to Mr Coshott, documents evidencing the transactions between Bay Pacific, GNH and third parties were apparently destroyed within months of the transactions being affected. Initially Mr Coshott suggested that these records were destroyed because GNH was no longer a client of Bay Pacific. He later corrected this to say that the records must have been destroyed by mistake. If Mr Coshott’s evidence that records were destroyed by mistake is to be believed, his conduct in respect of the records for the GNH insurance was, at best casual, and at worse cavalier and negligent.
CONCLUSIONS AND FINDINGS
I am satisfied Mr Coshott’s conduct in respect of his dealings with GNH and its representatives were dishonest for the reasons previously stated. I also find that Mr Coshott was involved in the contravention of s 1041G by Bay Pacific. I am satisfied Mr Coshott contravened s 1041H in respect of the letter of 8 March 2012 and from March 2012 by reason of his conduct and representations made by him about the existence of insurance for GNH. I am satisfied that Mr Coshott continued to be dishonest about the existence of insurance for GNH and fabricated the story that insurance was being provided through an underwriter in Singapore. He was not full and frank in his evidence to the Tribunal or in his disclosures and communications with Mr Avramides and representatives from Cresmont and Lloyds of London. Significantly, Mr Coshott was not full and frank with ASIC during its investigations. Having regard to these findings, I am satisfied that there is reason to believe Mr Coshott is not of good fame or character.
These contraventions and Mr Coshott’s conduct was serious because it had the potential to expose GNH to the potential for significant financial loss by being unknowingly uninsured. This conduct involved dishonesty. There is evidence premiums in the vicinity of $33,000 were collected and retained by Bay Pacific and that Mr Coshott would have thereby gained a significant financial benefit. While it is possible Mr O’Brien may have obtained the benefit, there was no evidence this was the case.
There is no evidence of prior breaches by Mr Coshott but I must nonetheless have regard to the fact Mr Coshott does not accept responsibility for the contraventions or his conduct, continues to deny them and was not full and frank when giving his evidence.
SHOULD A BANNING ORDER BE MADE AND, IF SO, FOR WHAT PERIOD?
ASIC contended that a permanent banning is appropriate and the decision of the delegate should be affirmed. The power to make a banning order is circumscribed by s 920B. If the Tribunal finds that Mr Coshott is not of good fame or character, there is no power to make a banning order limited in time. The order must be permanent. To the extent there is discretion to impose a time limited order, ASIC relies on the factors identified by Santow J in Adler at [55]–[56] as reflected in RG 98.
Adler concerned a breach of civil penalty provisions and, in particular, breach of directors duties. Santow J helpfully set out the guiding principles to be taken into account when the disqualification of a director is being considered. These principles have subsequently been adopted in a number of disqualification cases and in my view the principles are equally relevant to the exercise of the discretion under s 920A(1) of the Corporations Act. As observed by the Tribunal in Howarth and Australian Securities and Investments Commission (2008) 101 ALD 602; [2008] AATA 278 at [180]:
The weight of authority in the Federal and Supreme Courts to whose judgments we have referred seems to be to the effect that a disqualification order, and so a banning order, is made on the basis of what will protect the public. It is not made on the basis of what will punish the person concerned even though punishment or the imposition of a penalty may be the practical outcome of the making of an order. Deterrence is also a relevant concern. Deterrence may relate both to the person concerned and to others engaged or potentially engaged in the finance. If imposed, it is relevant in the case of the individual in that it protects the public from that person’s being involved in the industry. Whether imposed or not, the possibility that an order might be made is itself a deterrent both to an individual and to all of those engaged in that industry.
In Adler Santow J identified 15 factors relevant to disqualification. His Honour noted that longer periods of disqualification should be reserved for cases where contraventions have been of a serious nature, such as those involving dishonesty. He also noted that a mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming at [57].
Having regard to these matters and my findings, I find that a banning order is warranted.
Section 920B(2) provides that an order may prohibit a person from providing a financial service for a specified period unless ASIC has reason to believe that the person is not of good fame or character. I accept ASIC’s submission that if there is a reason to believe that the person who is the subject of the order is not of good fame or character, there is no discretion. That person must be permanently banned. Mr Coshott’s counsel conceded this in his closing oral submissions.
In this case, I have found that Mr Coshott is not of good fame or character. Accordingly, a permanent banning is appropriate in the circumstances of this case.
For completeness, I note that a banning order may be varied “if ASIC is satisfied that it is appropriate to do so because of a change in any of the circumstances based on which ASIC made the order” (s 920D(1)). Thus, if ASIC were subsequently to be satisfied that Mr Coshott had reformed and was thereby satisfied about his good fame or character, it could vary the banning order.
DECISION
I affirm the decision under review.

I certify that the preceding 155 (one hundred and fifty-five) paragraphs are a true copy of the reasons for the decision herein of Ms J L Redfern, Senior Member.
........................[SGD]................................................
Associate
Dated 17 September 2014

Date(s) of hearing 24 - 27 March & 15 May 2014

Counsel for the Applicant Mr O Jones

Solicitors for the Applicant Mr B Hocking of Martin Place Lawyers

Counsel for the Respondent Ms K Stern SC and Ms A Mitchelmore

Solicitors for the Respondent Mr N Goodstone of Australian Securities and Investments Commission

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2013/2068
Re	Ronald Coshott
APPLICANT
And	Australian Securities and Investments Commission
RESPONDENT

Tribunal	Ms J L Redfern, Senior Member
Date	17 September 2014
Place	Sydney

Date(s) of hearing	24 - 27 March & 15 May 2014
Counsel for the Applicant	Mr O Jones
Solicitors for the Applicant	Mr B Hocking of Martin Place Lawyers
Counsel for the Respondent	Ms K Stern SC and Ms A Mitchelmore
Solicitors for the Respondent	Mr N Goodstone of Australian Securities and Investments Commission