Australian Securities and Investments Commission v ACBF Funeral Plans Pty Ltd

Background to proceedings 3 On 29 October 2020, ASIC commenced proceedings against the two defendants, ACBF Funeral Plans Pty Ltd (ACBF) and Youpla Group Pty Ltd (Youpla). 4 By its Amended Statement of Claim filed 5 February 2021, ASIC claims that ACBF engaged in misleading or deceptive conduct and/or made false or misleading representations in its sale and promotion of the Aboriginal Community Funeral Plan (ACF Plan), in contravention of ss 12DA(1) and 12DB(1) of the Australian Securities and Investments Commission Act 2001 (Cth). As parent company of ACBF, Youpla is said to be knowingly concerned in or party to those alleged contraventions. The ACF Plan was a funeral insurance product providing cover for funeral expenses, which was principally offered and promoted to Aboriginal persons. 5 ASIC seeks declaratory relief and pecuniary penalties against the two defendants. 6 On 11 March and 27 April 2022, the first and second defendants respectively went into liquidation. 7 By 27 April 2022, most of the substantive steps in the proceedings had been completed: pleadings had closed, mediations had been held, the parties had filed their lay evidence and ASIC had filed its expert evidence. 8 At a case management hearing before me on 16 June 2022, ASIC signalled its intention to continue the proceedings against the defendants in liquidation, and was ordered to file an application seeking leave to do so by 14 July 2022. The liquidator of the defendants who attended the hearing said that he neither consented nor opposed ASIC's application, and sought to be excused from further appearances. 9 On 14 July 2022, ASIC filed an interlocutory application seeking leave to continue the proceedings against the defendants in liquidation.

Principles governing the grant of leave 10 Given that liquidators have now been appointed to the defendants under a creditors' voluntary winding up, ASIC requires leave to continue the proceedings under s 500(2) of the Corporations Act 2001 (Cth) (Corporations Act). That section provides that: 500 Execution and civil proceedings … (2) After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. 11 The authorities indicate that in order for leave to be granted, there must be a serious or substantial question to be tried: Rushleigh Services Pty ltd v Forge Group Ltd (in liq) [2016] FCA 1471 per Foster J. 12 In Australian Securities and Investments Commission v Caddick [2021] FCA 1443; (2021) 395 ALR 481 at [207]-[209], Markovic J referred to the previous authorities (including with respect to the parallel provision of s 471B of the Corporations Act) and observed that the rationale behind the requirement to seek leave is to prevent company assets being dissipated by unnecessary litigation or a multiplicity of proceedings. 13 It is irrelevant that a defendant in liquidation may not be able to pay any penalties sought in the proceedings: Australian Competition and Consumer Commission v Leahy (No 2) [2005] FCA 254; (2005) 215 ALR 281 at [11]; Australian Competition and Consumer Commission v Birubi Art Pty Ltd (No 2) [2018] FCA 1785 at [14]. As noted by Bromwich J in Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (In Liq) [2017] FCA 521 at [26], this is especially relevant in proceedings brought by an independent regulator such as ASIC, which is seeking to vindicate public rights and achieve general deterrence.

Consideration 14 I am satisfied that it is appropriate for ASIC to continue its proceedings against the defendants for the following reasons, as identified in ASIC's written submissions: (1) the matters raised by the pleadings and evidence filed by the parties in the proceedings (which, as noted, are at an advanced stage) establish that there is a serious question to be tried; (2) there is a clear public interest in the continuation of the proceedings. ASIC alleges that the defendants engaged in misrepresentations which, if established, would disclose misconduct with respect to a matter of cultural significance to the Indigenous customers of ACBF. If the contraventions are proven and relief granted, the proceedings will have an important deterrent effect against similar conduct; (3) the potential for this deterrent effect means that the capacity of the defendants to pay any pecuniary penalties is irrelevant. In any case, ASIC has undertaken not to enforce any pecuniary penalties or costs orders against the defendants without further leave of the Court. This provides an additional protection for the defendants' creditors against the dissipation of company assets; (4) ASIC is not in the position of an ordinary creditor which can obtain the relief it seeks through the liquidation process. This means there is unlikely to be a duplication of proceedings; and (5) the continuation of the proceedings is unlikely to interfere with the efficient winding up of the defendants given that the liquidators do not oppose ASIC's application. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jagot.