Australian Securities and Investments Commission v Cassimatis

ASIC'S PLEADED CASE 4 Summarising the case ASIC has pleaded in its FASC is a more difficult task. That is so, in part, because the FASC extends over some 683 pages. It is therefore convenient to begin by outlining the structure of that document. That, too, is set out in the summary judgment reasons (at [70]) as follows: ASIC's FASC is divided into 11 parts as follows: Part A - Relevant parties Part B - Obligations owed by [Cassimatises] Part C - The Business of Storm Part D - [Cassimatises'] responsibility for Storm's Advice Part E - Clients who invested in accordance with the Storm Model Part F - Further clients who invested in accordance with the Storm Model Part G - Breaches of section 945A by Storm Part H - Breaches of section 1041E by Storm Part I - Negligence and breach of retainer by Storm Part J - Breach of section 912A by Storm Part K - Breach of section 180 by the [Cassimatises]. The Part E investors (10 couples or individuals) and the Part F investors (36 couples or individuals) that are referred to frequently in the following paragraphs take those descriptors from the parts of the FASC which plead the details of the circumstances in which financial advice was provided to them by Storm. 5 Next, it is convenient to go to the summary of ASIC's case set out in its written submissions on this application, as follows: 7. ASIC's case against [the Cassimatises] begins with the allegation that they were each responsible for causing or permitting Storm to provide financial advice which advice had been created according to a process referred to as the Storm Model. 8. The material facts which ASIC relies upon to allege that [Mr Cassimatis] was responsible for the provision of financial advice by Storm in accordance with the Storm Model is pleaded in paragraphs 85 to 141 of the FASC [Part D above] under the following headings: (a) responsibility for the management of Storm's business; (b) role in establishing Storm's business; (c) role in developing and implementing the Storm Model; (d) role in developing an institutional relationship between Storm and fund managers who managed funds specifically created for Storm clients who were investing in accordance with the Storm Model; (e) role in developing an institutional relationship between Storm and various banks who lent funds to Storm clients to be invested in accordance with the Storm Model; (f) role in developing an institutional relationship between Storm and various margin lenders who lent funds to Storm clients to be invested in accordance with the Storm Model; (g) role in integrating new offices and new authorised representatives into the Storm business. 9. The material facts which ASIC relies upon to allege that [Mrs Cassimatis] was responsible for the provision of financial advice by Storm in accordance with the Storm Model is pleaded in paragraphs 142 to 180 of the FASC [Part D above] under the following headings: (a) responsibility for the management of Storm's business; (b) role in developing an institutional relationship between Storm and fund managers who managed funds specifically created for Storm clients who were investing in accordance with the Storm Model; (c) role in developing an institutional relationship between Storm and various banks who lent funds to Storm clients to be invested in accordance with the Storm Model; (d) role in developing an institutional relationship between Storm and various margin lenders who lent funds to Storm clients to be invested in accordance with the Storm Model; (e) role in integrating new offices and new authorised representatives into the Storm business; (f) role in implementing the Storm Model and monitoring compliance with Storm's processes for the creation of financial advice. 10. The nature of the Storm Model of investment, as it applied to the 46 Storm clients who received the financial advice which is the subject of the proceeding, is pleaded in paragraphs 22 to 84 of the FASC [Part C above]. In summary, the Storm Model of investment involved the creation of financial advice in accordance with the following processes: (a) the prospective client would attend an education seminar which introduced Storm's investment philosophies, including the importance of using debt to fund investments in indexed share funds; (b) the client would attend a meeting with a representative of Storm where a confidential financial profile, recording the client's personal and financial information, was completed; (c) the client would not be permitted to continue with the investment process unless that person marked boxes on the confidential financial profile which indicated a particular risk profile and investment time horizon; (d) the information from the confidential financial profile was sent to a section of the head office of Storm called the cash flow section where it was input into an excel spreadsheet and used to prepare what was referred to as a cash flow presentation; (e) the purpose of the cash flow presentation was, inter alia, to determine the amount the client could afford to invest under the Storm Model, the amount of the investment that could be funded by way of margin loan and the client's capacity to borrow against the security of real property to fund the remaining part of the investment; (f) the preparation of cash flow presentations was a process that was controlled by the head office of Storm and individual representatives were not permitted to alter the cash flow presentations; (g) Storm then obtained quotes for clients seeking funding by way of bank loan; (h) after finalisation of the cash flow presentation and obtaining of quotes for bank funding, Storm prepared a lengthy pro forma Statement of Advice setting out its investment recommendations for the client; (i) the Statement of Advice was prepared by the head office of Storm using a template document and completing variables relating to: (i) the total amount to be invested; (ii) the index funds into which the funds were to be invested and the split between the various funds; (iii) the sources of the investment funds; (iv) investment assumptions used to prepare the cash flow presentation; (j) Storm would then facilitate the investment, including all applications by the client for home loans, margin loans or investment into the index funds; (k) upon settlement of the bank loan or margin loan, Storm arranged for the funds to be disbursed to: (i) purchase units in the index funds; (ii) create a cash dam used to service the client's borrowings; and (iii) pay Storm's fees for the financial advice; (l) Storm then recommended further investments, called "steps", based upon movements in the stock market after the initial investment. 11. The proceedings against the [Cassimatises] are based upon the advice which Storm provided to investors, identified in the FASC. These 46 investors fall into two groups, namely the Part E Investors and the Part F Investors. 12. Paragraphs 179 to 783 of Part E of the FASC plead, in detail, the manner in which Storm provided financial advice in accordance with the Storm Model to 10 identified couples or individuals (the Part E Investors) and the investment by each of those investors in accordance with Storm's recommendations. 13. Paragraphs 784 to 1986 of Part F of the FASC then plead Storm's provision of financial advice to a further 36 couples or individuals and the investment by those investors (the Part F Investors). 14. In respect of each of the 10 Part E Investors, ASIC alleges that, in providing the financial advice to invest in accordance with the Storm Model, Storm: (a) [in Part G above] breached s.945A(1)(b) of the Corporations Act as it did not give such consideration to the subject matter of the advice and did not conduct such investigation of the subject matter of the advice as was reasonable in the circumstances; (b) [in Part G above] breached s.945A(1)(c) of the Corporations Act as it provided financial advice which was not appropriate to the investors having regard to the consideration and investigation that Storm ought to have undertaken, but did not undertake, of the subject matter of the advice; (c) [in Part H above] breached s.1041E(1) of the Corporations Act by making statements to the investor about the consideration which had been given to the investor's personal circumstances in creating the advice, which statements were misleading and deceptive; (d) [in Part I above] breached an implied term of the retainer between Storm and the investor and the duty which Storm owed to the investor to exercise reasonable care and skill in the provision of financial advice to the investor by providing advice which failed to have regard to the personal circumstances of the investor, was not appropriate to the personal circumstances of the investor and which a reasonably competent financial advisor would not have provided to the investor; (e) [in Part J above] breached s.912A(1)(a) and 912A(1)(c) of the Corporations Act in providing the financial advice to the investor; (f) was exposed to a risk of adverse legal outcomes as a consequence of these breaches. 15. In respect of each of the Part F Investors, ASIC pleads that in providing the financial advice to invest in accordance with the Storm Model, Storm: (a) [in Part G above] breached s.945A(1)(b) of the Corporations Act in that having regard to the information obtained from the relevant investor in relation to their personal circumstances, Storm did not give such consideration to the subject matter of the advice and did not conduct such investigation of the subject matter of the advice as was reasonable in the circumstances; (b) [in Part J above] breached s.912A(1)(a) and 912A(1)(c) of the Corporations Act in providing the financial advice to the investor; (c) was exposed to a risk of adverse legal outcomes as a consequence of these breaches. 16. ASIC then alleges [in Part K above] that: (a) the various risks to which Storm became exposed as a consequence of the advice provided to each of the Part E Investors and each of the Part F Investors was foreseeable; and (b) the degree of risk to which Storm was exposed was greater than a director, exercising his or her powers and discharging his or her duties with the degree of care and diligence that a reasonable person would exercise if he or she were in the position of either [Mr Cassimatis] or [Mrs Cassimatis], would permit Storm to be exposed to; (c) by causing or permitting Storm to provide advice to the Part E Investors and the Part F Investors to invest in accordance with the Storm Model, each of the [Cassimatises] exposed Storm to the risks identified above, and in doing so breached their obligations under s.180(1) of the Corporations Act. (Emphasis in original, cross references added and emphasised)

PROCEDURAL HISTORY 6 Turning next to the procedural history to this application, as noted above, ASIC commenced these proceedings in December 2010. In its original form, ASIC's statement of claim was a much shorter document. It ran to 244 pages and referred to 10 identified investors (individuals or couples) and 2756 "unidentified" investors. The latter group of investors was described only as "clients who invested in accordance with the Storm Model" and those investors were not named. Partly prompted by correspondence from the Cassimatises' solicitors, ASIC sought leave to amend its statement of claim in February 2011. It filed its amended document in April 2011. That version ran to 367 pages, with a 40 page schedule. It referred again to the 10 investors identified in its original statement of claim, but replaced the 2756 unidentified investors with 40 named investors. 7 In May 2011, the Cassimatises applied to strike out ASIC's amended statement of claim. That application - heard in June 2011 - was largely successful because during the hearing ASIC eventually accepted it would need to further amend its amended statement of claim. ASIC formally requested leave to file that amended version in August 2011. Leave was granted and it filed the present FASC shortly thereafter. 8 Soon after filing their defence to the FASC, the Cassimatises filed the present application which, as is noted above, sought summary judgment in the proceedings or, alternatively, various orders that ASIC's FASC be struck out. 9 The alleged defects in the FASC have been the subject of lengthy correspondence passing between the solicitors for the parties. The Cassimatises have consistently claimed that the FASC, even in its present form, suffers from a number of fundamental defects. For its part, ASIC has maintained that the defects alleged by the Cassimatises do not support a strike out application and has refused to make any further amendments to its FASC. This attitude is the basis for the Cassimatises' submissions in this application that, if they are successful in their challenges to any part of the FASC, that part should be struck out in full and ASIC should not be given any further opportunity to replead it. I will explain my reasons for rejecting this submission at the conclusion of these reasons.

THE FIVE HEAD CATEGORIES OF CHALLENGE 10 In this part of their application, the Cassimatises have applied to strike out numerous paragraphs of ASIC's FASC under r 16.21 of the Federal Court Rules 2011 (the Rules). There are nine separate categories of challenge to the FASC - paragraphs 2(a) to 2(i) inclusive of the application - involving hundreds of paragraphs of the FASC. However, paragraphs 2(g) and 2(i) of the application are no longer pressed and paragraph 2(f) is only partly pursued. Further, paragraphs 2(a) and 2(b) of the application will be dealt with together in one head category because they raise similar issues, as will paragraphs 2(f) and 2(h) for the same reason. Finally, it should be noted that paragraph 2(c) is split into four subcategories. Thus, there are five head categories of challenge to be considered in this application as follows: (1) paragraphs 2(a) and 2(b) - paragraph 193 and its equivalents of Part E of the FASC and Part F, or alternatively paragraph 791 and its equivalents. (2) paragraph 2(c) with four subcategories - subparagraphs (a), (d), (e) and (g) of paragraph 1992 and its equivalents of Part G of the FASC. (3) paragraph 2(d) - subparagraph 1993(e) and its equivalents of Part G of the FASC. (4) paragraph 2(e) - subparagraph 1993(h) and its equivalents of Part G of the FASC. (5) paragraph 2(f) and 2(h) - subparagraph (b)(iii) of paragraph 1994 and its equivalents of Part G of the FASC and Part I, or alternatively paragraph 2289 of Part I of the FASC. 11 As will be apparent from the headings above, each of these five head categories includes all of the correlated paragraphs where similar allegations are pleaded in relation to each of the 46 Part E and Part F investors and each of the various statements of advice that were provided to them. For example, paragraph 2(a) identifies 46 paragraphs of Part E of the FASC where allegations are made about, among other things, the circumstances in which the individual statements of advice were provided to each of the 10 Part E investors. Paragraph 2(b) of the application does likewise (159 paragraphs of Part F of the FASC) in relation to the individual statements of advice that were provided to the 36 Part F investors. 12 For convenience, the written and oral submissions of the parties have been directed to an exemplar paragraph in each head or subcategory. Insofar as the Part E investors are concerned, each exemplar paragraph involves the same couple: Mr and Mrs Dodson, and the same statement of advice: that provided to them on 27 November 2007. For the first four head categories, it is possible to use the Dodsons and the advice provided to them on 27 November 2007 as the standard example because the issues involved do not raise any relevant distinction between the Part E and the Part F investors. However, with the fifth head category, there is a distinction between the two groups of investors such that it will be necessary to use a separate exemplar paragraph for each of the Part E and the Part F investors. 13 These reasons will only address those exemplar paragraphs of the FASC in each head or subcategory as chosen by the parties. However, it should be noted that the orders that I have made in relation to those exemplar paragraphs are intended to apply to all of the correlated paragraphs in that head or subcategory.

RULE 16.21 AND SOME PERTINENT PRINCIPLES 14 Rule 16.21(1) of the Rules relevantly provides: A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading: (a) contains scandalous material; or (b) contains frivolous or vexatious material; or (c) is evasive or ambiguous; or (d) is likely to cause prejudice, embarrassment or delay in the proceeding; or (e) fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or (f) is otherwise an abuse of the process of the Court. 15 The principles applicable to an application of this kind are well established. They have been recorded in countless decisions in the past. Rather than repeating that exercise, I will gratefully adopt a summary of those principles from a recent decision of Griffiths J in Lion-Dairy & Drinks Pty Limited v Sinclair Knight Merz Pty Limited [2013] FCA 869 (at [10] to [16]). They are: [(a)] … a pleading is embarrassing where "it is unintelligible, ambiguous, vague or too general so as to embarrass the opposite party who does not know what is alleged against him, or if the pleading is susceptible to various meanings or contains inconsistent allegations or in which alternatives are confusingly intermixed or in which irrelevant allegations are made that tend to increase expenses". [(b)] … the function of a pleading is to state with sufficient clarity the case that must be met, i.e., the pleading fulfils a basic procedural fairness requirement that a party should have the opportunity of knowing and be able to meet the case against them. [(c)] … a statement of claim must plead all the material facts necessary for the purpose of formulating a complete cause of action. [(d)] … it is insufficient to state conclusions drawn from unstated facts. [(e)] … the discretion to strike out a pleading should be exercised with "great" or "exceptional" caution. [(f)] … in some cases the power to strike out pleadings will not be exercised notwithstanding a failure to plead all material facts. Such restraint will be appropriate where the deficiency causes no confusion and does not raise issues of substantive principle and where deficiencies can be overcome by ordering the provision of particulars, or the furnishing of affidavits … [(g)] … it is inappropriate to adopt a pedantic approach in determining whether or not to strike out pleadings … (Citations omitted)

(1) PARAGRAPHS 2(A) AND 2(B) - SECTION 945A(1)(B) - "IN ALL OF THE CIRCUMSTANCES" 16 In this first head category, paragraph 193 of the FASC has been chosen as the exemplar paragraph. As is noted above, this paragraph falls within Part E of the FASC and it has counterparts throughout both Part E and Part F of the FASC. Paragraph 193 of the FASC is directed to the circumstances that dictate the reasonable consideration and investigation Storm was required to undertake under s 945A(1)(b) of the Corporations Act when providing financial advice to one of its clients. 17 As at November 2007, s 945A(1) of the Corporations Act provided that: The providing entity must only provide the advice to the client if: (a) The providing entity: (i) determines the relevant personal circumstances in relation to giving the advice; and (ii) makes reasonable inquiries in relation to those personal circumstances; and (b) having regard to information obtained from the client in relation to those personal circumstances, the providing entity has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all of the circumstances; and (c) the advice is appropriate to the client, having regard to that consideration and investigation. (Emphasis added) 18 Paragraph 193 of the FASC pleads that: For the purposes of s.945A(1)(b) of the Corporations Act, the circumstances by which the reasonableness of the consideration which Storm gave to the subject matter of the advice contained in the Statement of Advice dated 27 November 2007 comprised: (a) the personal circumstances of Mr and Mrs Dodson as pleaded in paragraph 182 above; and (b) the subject matter of the advice as pleaded in paragraph 192 above. … (Underlining omitted) 19 To put this plea in context, it is appropriate to set out the other paragraphs of the FASC that are either connected to, or cross-referenced in it. They are: paragraph 182, which is connected to the event pleaded in paragraph 181; and paragraph 192, which is cross-referenced to paragraph 191, which, in turn, is connected to the matters pleaded in paragraphs 188 to 190 inclusive. Paragraphs 181 to 182 and 188 to 192 inclusive plead that: 181 On or about 1 November 2007, Mr and Mrs Dodson met with Mr Fullerton-Smith for the purpose of completing a confidential financial profile. 182 The confidential financial profile recorded the following information (which was the information relating to the personal circumstances of Mr and Mrs Dodson for the purposes of s.945A(1)(b) of the Corporations Act): (a) Mr Dodson was born on 2 February 1947; (b) Mrs Dodson was born on 3 September 1952; (c) Mr Dodson was engaged in casual employment as a traffic controller; (d) Mrs Dodson was engaged in part time employment as an aged carer; (e) Mr and Mrs Dodson had a combined income of $58,996.00; (f) Mr and Mrs Dodson had combined living expenses of $49,586.00; (g) Mr and Mrs Dodson had the following assets: (i) Cash in the amount of $10,800.00; (ii) Two motor vehicles valued at $10,000 combined; (iii) Their residence in the suburb of Wynnum North valued at $460,000.00; (iv) An investment in a Colonial First State Managed Investment Fund valued at $65,653.00; (v) Superannuation held by Mr Dodson valued at $116,538.00; (vi) Superannuation held by Mrs Dodson valued at $122,059.00; (h) Mr and Mrs Dodson had the following liabilities: (i) A line of credit facility with BOQ with a credit limit of $65,000.00 but which stood in credit; (ii) An amount of $2,544.00 owed on Mr Dodson's Visa card; (i) Mr and Mrs Dodson's financial objectives were: (i) to live self sufficiently and be happy until the day they died; (ii) to travel in retirement. … … 188 On or about 27 November 2007, Mr Fullerton-Smith met with Mr and Mrs Dodson and presented them with the Statement of Advice prepared by the head office of Storm. 189 The Statement of Advice prepared for Mr and Mrs Dodson was in the standard form of advice produced by the head office of Storm. 190 The Statement of Advice prepared for Mr and Mrs Dodson, stated: (a) on page 2 of 106: (i) that the report had been prepared following investigation into the needs of Mr and Mrs Dodson; (ii) that Storm had made recommendations to address the needs of Mr and Mrs Dodson based on the assumptions set out in the Statement of Advice; (iii) that Storm had recommended a process that would help Mr and Mrs Dodson to achieve their goals; (b) on page 20 of 106: (i) that Mr and Mrs Dodson had provided Storm with information about their current financial position and any other relevant circumstances; (ii) that Storm had used that information to evaluate the existing financial profile of Mr and Mrs Dodson and to prepare the recommendations in the Statement of Advice. 191 The Statement of Advice recommended that Mr and Mrs Dodson: (a) take out a loan of $276,000.00 from the BOQ; (b) take out a margin loan of $90,000.00 from Colonial; (c) use their existing managed funds worth approximately $65,000.00 as security for the margin loan; (d) using those borrowings to invest: (i) $16,000.00 in the Storm Australian Technology Indexed Trust; (ii) $202,000.00 in the Storm Australian Industrials Indexed Trust; (iii) $97,000.00 in the Storm Australian Resources Indexed Trust; (iv) pay Storm's fees of $26,960.00 for the advice; (v) the residue of approximately $21,000.00 in a Macquarie Investment Management Ltd Cash Management Trust Account. 192 For the purposes of s.945A(1)(b) of the Corporations Act, the subject matter of the advice contained in the Statement of Advice dated 27 November 2007 consisted of: (a) the matters set out in the statement in the second paragraph on page 13 of that Statement of Advice that: "You have asked our advice on the best ways to continue your wealth building over the next 10 years and beyond. Important financial goals for the future include building a solid financial base that will aid your wealth creation, allowing you to maintain a comfortable lifestyle into your retirement. It is therefore a major aim to produce a portfolio of assets that will result in an income stream independent of your personal exertion work. This will facilitate the transition to relying on income from your capital, that is, you embark on your Journey to Capitalism." (b) the investment recommendations set out on page 50 of that Statement of Advice as pleaded in paragraph 191 above. (Underlining and struck out passages omitted) 20 Mr Franco, counsel for the Cassimatises, submitted that paragraph 193 does not contain a comprehensible sentence and it lacks any grammatical meaning. I take this to mean that the paragraph does not give proper notice to the Cassimatises of the case they have to meet on this particular aspect. Mr Franco also complained that, despite being asked on numerous occasions in the correspondence that passed between the solicitors for the parties to clarify this paragraph, ASIC has steadfastly refused to do so. This submission is repeated in relation to most of the Cassimatises' challenges to the FASC and is connected to the submission referred to at [9] above. As noted there, I will address it in the conclusion to these reasons. 21 Mr Cooper, counsel for ASIC, submitted that the reference to s 945A(1)(b) of the Corporations Act at the beginning of paragraph 193 makes its meaning clear. However, in ASIC's written submissions, it appeared to concede that this paragraph could be expressed differently and, I infer, more clearly, if the words "is to be assessed" were to be inserted before the word "comprised" in the introductory words. 22 It is correct to say that this paragraph of the FASC is somewhat awkwardly structured. It begins well enough by identifying the apposite provision of the Corporations Act - s 945A(1)(b) - and the central concept that is identified in that section, viz the circumstances which dictate the reasonable consideration that is required of a person when it is providing financial advice to a client. But rather than immediately setting out those circumstances in subparagraphs (a) and (b), paragraph 193 creates the awkwardness I have mentioned above by first inserting the words "by which the reasonableness of the consideration … dated 27 November 2007". 23 Based on its implicit concession (see [21] above), ASIC itself seems to accept that this paragraph is awkward. However, for present purposes, structural elegance is not the imperative. Instead, it is whether this paragraph of the FASC gives fair notice to the Cassimatises of the case they have to meet on this particular aspect of ASIC's case against them. In that respect, despite its awkwardness, when paragraph 193 is read in the context of the provision that it begins by identifying, viz s 945A(1)(b), I do not consider it results in the unfairness or ambiguity that the Cassimatises have complained about. To the contrary, I consider that when it is read in that context, it can be fairly understood to mean that ASIC's case on this aspect is that the circumstances described in subparagraphs (a) and (b) are the circumstances identified by s 945A(1)(b) that go to define the reasonable consideration and investigation prescribed by that section. 24 I therefore reject the Cassimatises' complaints in relation to this first category of its application.

(2) PARAGRAPH 2(C) - SECTION 945A(1)(B) - REASONABLE CONSIDERATION AND INVESTIGATION 25 Paragraph 1992 is the chosen exemplar paragraph for this second head category. It falls within Part G of ASIC's FASC where Storm's alleged breaches of s 945A(1) of the Corporations Act are pleaded in relation to both the Part E and Part F investors: see [4] and paragraphs 14 and 15 of the summary at [5] above. This paragraph is directed to another aspect of the matters prescribed by s 945A(1)(b) above, viz the reasonable consideration and investigation that was required of Storm when it provided the statement of advice to the Dodsons on 27 November 2007. In summary, ASIC alleges in paragraph 1992 that, in providing that statement of advice to the Dodsons, Storm did not undertake the requisite reasonable consideration and investigation for the reasons expressed in the seven subparagraphs to paragraph 1992: subparagraphs (a) to (g). The Cassimatises challenge four of those subparagraphs under this second head category. They are subparagraphs (a), (d), (e) and (g). 26 To put these challenged subparagraphs in their proper context, it is worth setting out the whole of paragraph 1992 of the FASC. It is as follows: In creating the Statement of Advice dated 27 November 2007, in accordance with the process pleaded in paragraphs 44 to 61 above, having regard to the information obtained from Mr and Mrs Dodson in relation to their personal circumstances (as pleaded in Part E above), Storm did not give such consideration to the subject matter of the advice, and did not conduct such investigation of the subject matter of the advice, as was reasonable in all of the circumstances in that: (a) the recommendations made in the Statement of Advice by Storm were so inappropriate to the personal circumstances of Mr and Mrs Dodson, that the recommendations themselves evidence that Storm did not give such consideration or investigation to the subject matter of the advice as was reasonable in all the circumstances; (b) Storm's primary consideration and investigation of the best way to continue Mr and Mrs Dodson's wealth building was, in accordance with the processes pleaded in paragraphs 39 to 55 above, a consideration of and investigation into the capacity of Mr and Mrs Dodson to invest in accordance with the Storm Model; (c) the primary consideration which Storm gave to the recommendations for the purpose of wealth building was the preparation of a cash flow in accordance with the processes pleaded in paragraphs 44 to 53 above; (d) apart from - (i) the cash flow annexed to the Statement of Advice; (ii) the parts of the Statement of Advice which were generated from that cash flow; and (iii) matters specific to the personal circumstances of Mr and Mrs Dodson, the content of the Statement of Advice consisted of pro forma statements and did not constitute consideration or investigation of the subject matter of the advice as was reasonable in all the circumstances; (e) the process by which Storm provided advice to Mr and Mrs Dodson as pleaded in paragraphs 33 to 84 above required Mr and Mrs Dodson to identify for themselves whether or not investment in accordance with the Storm Model was appropriate for their personal circumstances; (f) the process by which Storm provided advice to Mr and Mrs Dodson as pleaded in paragraphs 33 to 84 above meant: (i) the only investment strategy that Storm could recommend to Mr and Mrs Dodson would be the Storm Model regardless of whether or not the Storm Model was appropriate for them having regard to their personal circumstances; (ii) Storm did not give such consideration to or investigation of whether the financial objectives of Mr and Mrs Dodson could be met by an alternative investment strategy that did not involve the risk associated with the geared nature of investing in accordance with the Storm Model as was reasonable in all the circumstances; (g) any consideration or investigation set out in the Statement of Advice of any investment strategy other than investment in accordance with the Storm Model consisted of proforma (sic) statements and did not represent a consideration or investigation that had regard to the information obtained about the personal circumstances of Mr and Mrs Dodson.

The challenge to subparagraph 1992(a) 27 Subparagraph 1992(a) alleges that the recommendations made in the statement of advice provided to Mr and Mrs Dodson on 27 November 2007 "were so inappropriate to [their] personal circumstances" that the recommendations in and of themselves provide evidence that Storm did not undertake the reasonable consideration and investigation that was required of it by s 945A(1)(b). 28 The Cassimatises made a number of complaints about this subparagraph. First, they submitted that it states a conclusion and does not plead the material facts that are relied upon to reach that conclusion. Secondly, they submitted that it describes evidence, rather than material facts, and this is demonstrated by the use of the word "evidence" in the body of the subparagraph. Finally, they submitted that the expression "so inappropriate" is meaningless because the advice is either appropriate, or it is not, as s 945A(1)(b) does not describe degrees of appropriateness. 29 ASIC submitted that the question whether the advice is appropriate, having regard to the reasonable consideration and investigation undertaken, is dealt with in s 945A(1)(c) and, as a consequence, the facts it relies upon to show that the statement of advice was inappropriate are separately set out in paragraph 1993. ASIC submitted that the question that is addressed by paragraph 1992 is whether, in accordance with s 945A(1)(b) (not (1)(c)), Storm undertook the reasonable consideration and investigation demanded of it by the circumstances. In this subparagraph, it relies on the extent to which the recommendations in the statement of advice were not appropriate for the Dodsons' personal circumstances to demonstrate that Storm did not comply with s 945A(1)(b). Therefore, ASIC submitted, paragraph 1992(a) properly pleads one of the matters ASIC relies upon to establish the absence of that reasonable consideration and investigation. 30 Subject to the one aspect outlined below, I essentially agree with ASIC's analysis of the pleading in this subparagraph. In my view, subparagraph 1992(a) properly puts the Cassimatises on notice that one of the ways in which ASIC proposes to establish that Storm did not undertake the reasonable consideration and investigation required of it by s 945A(1)(b) is to highlight the extent to which the recommendations in the statement of advice were unsuitable for the Dodsons' personal circumstances. In that respect, I consider it is quite apt to use the word "so" as an adverb to qualify the adjective "inappropriate" to convey the meaning that those recommendations were to such a degree or extent unsuitable or unfitting for that purpose that they evidenced a lack of reasonable consideration and investigation by Storm. The extent of the unsuitability of the recommendations is therefore the material fact ASIC relies upon in relation to this particular aspect of its case against the Cassimatises. In this context, that matter is not a conclusion and nor is it evidence. The rider I would place on this arises from something ASIC's counsel said in oral submissions. In those submissions, Mr Cooper pointed to paragraph 1993 and submitted that that paragraph contained the particulars of the "recommendations" to which the expression "so inappropriate" in paragraph 1992(a) was directed. In my view, this is not clear from a fair reading of paragraphs 1992 and 1993. Because the "recommendations" being referred to are pivotal to the allegation in paragraph 1992(a), I consider the Cassimatises are entitled to know precisely what they are. I will therefore order that ASIC provide particulars of the recommendations that are referred to in paragraph 1992(a).

The challenge to subparagraph 1992(d) 31 Similar to subparagraph 1992(a), this subparagraph pleads another of the ways in which ASIC proposes to establish that Storm did not undertake the reasonable consideration and investigation required of it by s 945A(1)(b). Subparagraph 1992(d) alleges that this is to be established by the circumstances that, apart from certain identified parts of the statement of advice, "the content of the Statement of Advice consisted of pro forma statements". 32 The Cassimatises submitted that it is meaningless to say, as subparagraph 1992(d) does, that apart from those parts of the statement of advice that were not pro forma, the content of the statement of advice was pro forma. The result is, so they submitted, that no attempt has been made by ASIC to identify the various parts of the statement of advice that were either pro forma, or not. For example, they pointed to the fact that the parts of the statement of advice referred to in subparagraph (ii) have not been identified. Finally, the Cassimatises submitted that ASIC has had ample opportunity to provide proper particulars of these allegations in the correspondence that has passed between the solicitors for the parties and, in those circumstances, this subparagraph should be struck out, rather than ASIC now being given an opportunity to provide those particulars. Since this latter submission falls into the same category as that mentioned above (at [9]), it too will be dealt with at the conclusion of these reasons. 33 In response, ASIC submitted that it had set out elsewhere in the FASC the aspects of the statement of advice that are described in subparagraphs (i) to (iii). In any event, it submitted that, since they were the founders and owners of Storm, the Cassimatises should be well aware of the "template nature of the advice, including which parts were pro forma". To the extent that the Cassimatises' complaints about this subparagraph really amounted to a request for particulars, ASIC submitted that the Cassimatises gave notice some time ago that they intended to seek particulars, but no such request has ever been made. In oral submissions, Mr Cooper clarified that this subparagraph is intended to plead that, apart from the aspects of the statement of advice that are identified in subparagraphs (i) to (iii), the whole of the balance of the content of the statement of advice was pro forma in nature. He added that the parts identified in subparagraphs (i) to (iii) occupied only a small part of a lengthy document. 34 In my view, the allegations in this subparagraph do suffer from some lack of clarity and particularity. Nonetheless, with Mr Cooper's clarification above, I consider the Cassimatises now have fair notice of exactly how ASIC proposes to use this subparagraph to put its case against them. And, as that clarification is now recorded in these reasons, I do not consider this aspect of the Cassimatises' complaints about this subparagraph warrants any further time or expense being devoted to it. As to the lack of particularity in this subparagraph, since the limited parts of the statement of advice that are not pro forma in nature are relied upon by ASIC to underscore, by comparison, the extent to which the balance of the statement of advice is pro forma in nature, I consider the Cassimatises are entitled to know exactly what parts of it ASIC alleges constitute the former. It is no answer to say that the Cassimatises should know what those parts are because they were the founders of Storm and devised the Storm Model. ASIC is obliged to tell the Cassimatises exactly what facts it intends to rely upon to establish this allegation and they should not be left to speculate on what they might be. I will therefore order that ASIC provide particulars of those parts of the statement of advice that it alleges are not pro forma in nature.

The challenge to subparagraph 1992(e) 35 Continuing on the theme outlined above, this subparagraph pleads another of the ways in which ASIC proposes to establish that Storm did not undertake the reasonable consideration and investigation required by s 945A(1)(b). Subparagraph 1992(e) pleads that this deficiency is to be established from the fact that the process that Storm followed in providing the statement of advice to Mr and Mrs Dodson on 27 November 2007 effectively required them to analyse for themselves whether an investment in accordance with the Storm Model was appropriate for them. 36 The Cassimatises complain that subparagraph 1992(e) does not plead material facts, but instead pleads a conclusion. They submitted that no material facts are pleaded in the FASC to show how the Dodsons were allegedly "required" to decide for themselves whether the investment was appropriate for them. Further, they submitted it is unclear how ASIC alleges that the process concerned was capable of requiring the Dodsons to make that decision since there is no allegation of any overbearing conduct, or similar, on Storm's part to support such an allegation. Finally, the Cassimatises submitted that s 945A(1)(b) does not proscribe conduct whereby a financial adviser asks a client to decide whether financial advice is appropriate to their circumstances. Thus, they submitted, the plea in this subparagraph is irrelevant. 37 ASIC submitted that subparagraph 1992(e) pleads the results of the process employed by Storm, viz that the Dodsons were left to their own devices to assess whether the proposed investment was appropriate to their personal circumstances. It submitted this result is the crux of the allegation in this subparagraph and it therefore constitutes a material fact. Accordingly, ASIC submitted it is not a conclusion. It submitted that subparagraph 1992(e) must be read in the context of the introductory words of paragraph 1992 which identify its purposes. It stated that, on this aspect of its case, it was not relying upon, and therefore not alleging, any overbearing conduct by Storm. It also submitted that this pleading was not directed to the appropriateness of the advice provided, but to whether the requisite reasonable consideration and investigation was undertaken when it was provided. 38 I do not consider the Cassimatises' various complaints about subparagraph 1992(e) have any merit. The process detailed at paragraphs 33 to 84 of the FASC (which paragraphs are specifically adopted in this subparagraph) is described more fully in the heading to that section of the FASC as the "Process for investment in accordance with [the] Storm Model". As pleaded in those paragraphs, that process included: the clients attending Storm education seminars; information being collected from the clients about their personal and financial circumstances; Storm preparing cashflow analyses and presenting those to the clients; and Storm providing written statements of advice to the clients setting out its investment recommendations. This process is described in more detail in paragraph 10 of the summary at [5] above. The clear import of subparagraph 1992(e) is that, after engaging in that process, Mr and Mrs Dodson were effectively left to their own devices to work out whether the investment in accordance with the Storm Model was appropriate for them. That result is plainly material to the plea ASIC makes in the introductory words to paragraph 1992 to the effect that Storm did not give the consideration nor conduct the investigation of the subject matter of the statement of advice that was reasonable in all the circumstances. That result is therefore a material fact. Conversely, it is not a conclusion. Furthermore, for these reasons I do not consider the matters pleaded in this subparagraph are unclear or irrelevant.

The challenge to subparagraph 1992(g) 39 This subparagraph contains the final of the four challenged subparagraphs of paragraph 1992. As noted above, paragraph 1992 of the FASC is the paragraph where ASIC describes how it proposes to establish that Storm did not undertake the reasonable consideration and investigation required of it by s 945A(1)(b) of the Corporations Act. In subparagraph 1992(g), ASIC claims this will be established from the fact that the alternative investment strategies to the Storm Model, as set out in the statement of advice provided to Mr and Mrs Dodson on 27 November 2007, were not properly considered or investigated. 40 The Cassimatises submitted that this subparagraph does not make it clear whether ASIC's case is that the statement of advice did not contain any consideration or investigation of any alternative investment strategy to the Storm Model, or whether its case is that there was some such consideration or investigation of alternative investment strategies, but it was inadequate. Further, the Cassimatises submitted that this subparagraph does not identify the "pro forma statements" that are referred to. Finally, the Cassimatises submitted that this subparagraph confuses the process (the consideration or investigation) involved in providing the advice with its outcome, viz the advice itself. 41 In response, ASIC submitted that subparagraph 1992(g) makes its case clear on this aspect. It is that, where the statement of advice included consideration of an alternative investment strategy to that offered by the Storm Model, that consideration involved the use of pro forma statements and it was not the product of any reasonable consideration or investigation as required by s 945A(1)(b). To the extent that the Cassimatises' complaint about this subparagraph really amounted to a request for particulars, ASIC repeated the submission recorded earlier in these reasons (see [33] above) that the Cassimatises gave notice some time ago that they intended to seek further and better particulars of this allegation, but no such request has ever been made. Finally, ASIC submitted that this subparagraph pleads an aspect of the outcome, ie the advice, as a fact in its case that the process that was followed in providing the advice did not comply with s 945A(1)(b). It therefore submitted there was no validity in the Cassimatises' claim that confusion existed between the advice itself and the process that was followed to produce it. 42 In my view, the allegations in this subparagraph suffer from a similar lack of particularity to that highlighted above in relation to subparagraph 1992(d). Specifically, it fails to identify the particular parts of the statement of advice which ASIC says were "pro forma statements". As with subparagraph 1992(d), the Cassimatises are entitled to know what those parts are and it is no answer to say they should know because they designed the template statements of advice concerned. Furthermore, the Cassimatises are entitled to know precisely what parts of the statement of advice involved any consideration or investigation of the alternative investment strategies referred to in this subparagraph. This should not be left to be implied by them. Otherwise, I agree with ASIC's submissions that this subparagraph seeks to rely upon an identified feature of the statement of advice in its case that the process that was followed in providing the advice did not comply with s 945A(1)(b). Whether that is ultimately established as a fact and, if it is, whether it goes to establish that Storm did not comply with s 945A(1)(b) are matters that will have to await determination at the trial of these proceedings. I will therefore order that ASIC provide particulars of the "pro forma statements" that are referred to in subparagraph 1992(g) and those parts of the statement of advice, if any, that it says involved any consideration or investigation of an investment strategy other than that offered by the Storm Model.

(3) PARAGRAPH 2(D) - SECTION 945A(1)(C) - INAPPROPRIATE ADVICE FOR RISK PROFILE 43 Subparagraph 1993(e) of the FASC is the exemplar paragraph for this third head category. As noted above (see at [29]), ASIC submitted that paragraph 1993 sets out the ways in which the statement of advice that was provided to Mr and Mrs Dodsons on 27 November 2007 was inappropriate to their personal circumstances in breach of s 945A(1)(c) of the Corporations Act. As with paragraph 1992, this paragraph falls within Part G of the FASC where Storm's alleged breaches of s 945A(1) are pleaded (see paragraphs 14 and 15 of the summary at [5] above). 44 Section 945A(1) of the Corporations Act is set out above (at [17]) and does not require repeating here. It will suffice to note that the final leg of it, viz sub-s 1(c), requires that: "the advice is appropriate to the client, having regard to [the] consideration and investigation" prescribed in sub-ss 1(a) and (b). 45 Also pertinent to this head category is s 761A of the Corporations Act, as at November 2007, which contained definitions of a number of expressions used in Ch 7 of the Corporations Act. As at that time, s 945A was contained in Ch 7. Among the defined expressions was the following definition of the expression "relevant personal circumstances": in relation to advice provided or to be provided to a person in relation to a matter, are such of the person's objectives, financial situation and needs as would reasonably be considered to be relevant to the advice. 46 To reflect the proper context of subparagraph 1993(e), it is appropriate to set out the whole of paragraph 1993. It is as follows: The advice contained in the Statement of Advice dated 27 November 2007 (consisting of the investment recommendations set out therein and pleaded in Part E above) was not appropriate to the personal circumstances of Mr and Mrs Dodson, having regard to the consideration and investigation of the subject matter of the advice that was reasonable in all of the circumstances, in that: (a) the standard form of the Statement of Advice which Storm provided to Mr and Mrs Dodson recognised that where clients do not have regular income there was a need to be particularly careful when undertaking a strategy of investing in shares via gearing; (b) while the Storm Model for investment did not advocate placing all of Mr and Mrs Dodson's wealth in shares the effect of the investment strategy was to expose the non-share assets to movements in the share market by using them as security for the home loan and margin loan used to fund the investment in the Storm Funds; (c) as Mr and Mrs Dodson were only a few years from retirement they had only a limited time in which to recoup assets in the event that the market fell and the investment needed to be sold at a loss; (d) clients with limited income earning potential in the lead up to retirement may not have the capacity to meet interest costs on borrowed funds if the investment portfolio does not generate sufficient cash flow; (e) Mr and Mrs Dodson were not prepared to accept a real risk that some of their assets might be irrevocably lost; (f) the geared nature of the recommended investment increased the chance that Mr and Mrs Dodson would suffer an irrecoverable loss of capital if markets fell in value due to short term volatility; (g) capitalising interest and reinvesting income could compound the potential loss if markets fell and thereby increase the risk of the investment strategy; (h) Mr and Mrs Dodson could have achieved their stated financial objectives without investing in accordance with the Storm Model by implementing an investment strategy based on: (i) saving and salary sacrifice into superannuation until they each reached retirement age; (ii) living on the earnings from their assets and the age pension once they each reached age pension age; (iii) gradually drawing down their capital to cover any shortfall between their income and expenses. 47 While it does not expressly say so, it became apparent in oral submissions that subparagraph 1993(e) relies on a number of other parts of the FASC which describe information that Mr and Mrs Dodson provided to Storm about their investment risk profile. It is therefore appropriate, at this point, to identify what those parts of the FASC are. In general, they relate to a document entitled Confidential Financial Profile that each investor was required to complete as a part of the Storm Model process described above: see at [38]. First, Part C of the FASC which is headed "The Business of Storm" contains a section entitled "Collection of Client Information" (paragraphs 39 to 43 inclusive). Among other things, that section describes what a Confidential Financial Profile is and the procedure that was followed to complete it. The pertinent parts of that section, for present purposes, are those that describe how a client's investment risk profile is identified as a part of the Storm Model process. They are as follows (paragraphs 42 to 43 inclusive): 42 The confidential financial profile also contained: (a) a risk and volatility statement which identified four different investment risk profiles and required the Investor to tick and initial the box beside the risk profile that best represented that person's views on investments; and (b) an investment time horizon which identified five different time periods and required the Investor to tick and initial the box that represented the time horizon for their investment. 43 The Investor would not be permitted to continue with the process of seeking to invest in accordance with the Storm Model unless that person marked the boxes which indicated that: (a) in terms of risk, he or she was "prepared to accept volatility if in the medium to long term the investment growth is higher and the risks over that term are minimal or eliminated" or he or she was "prepared to accept short or medium term volatility and a level of real risk where some of [the Investor's] asset may be irrevocably lost"; and (b) in terms of investment time horizon, he or she intended to maintain the investment for a period of 5 to 7 years or more. (Underlining and struck out passages omitted) 48 The circumstances in which Mr and Mrs Dodson completed their Confidential Financial Profile as part of the Storm Model process and the information they disclosed in it are described at paragraphs 181 to 183 of the FASC. The first two of these paragraphs are set out above: see at [19]. Paragraph 183 is as follows: As they were required to do in order to receive advice to invest in accordance with the Storm Model (as pleaded in paragraph 43 above), Mr and Mrs Dodson identified their investment risk profile as being prepared to accept volatility if in the medium to long term the investment growth is higher and the risks over that term were minimal or eliminated. (Underlining omitted) 49 The four different investment risk profiles mentioned in paragraph 42(a) of the FASC above are not separately described in the FASC. However, in its written submissions, ASIC pointed out that they are set out in the Cassimatises' defence as follows (at paragraph 58(a)): I am prepared to entertain speculative ventures of a risky nature and am prepared to lose my asset totally if necessary in an attempt to make high profits. I am prepared to accept short to medium term volatility and am also prepared to accept a level of real risk where some of my asset may be irrecoverably lost. I am prepared to accept volatility if in the medium to long term the investment growth is higher and the risks over that term are minimal or eliminated. I am not prepared to accept any level of volatility and realise that this selection will result in low growth and substantial exposure to inflation risk. 50 There is a number of matters that should be noted about these parts of the FASC. First, the parts of paragraph 43(a) that are within quotation marks replicate most of, in order, the third and second investment risk profile above. Secondly, the concluding words of paragraph 183 of the FASC: "prepared to accept volatility … minimal or eliminated" are almost identical to the third investment risk profile above. Finally, the words of paragraph 1993(e) of the FASC: "might be irrevocably lost" are similar to the concluding words of the second investment risk profile above. However, it is to be noted that the second investment risk profile above is expressed as a positive statement whereas in paragraph 1993(e) it is expressed as a negative statement. 51 The Cassimatises began by submitting that the matters pleaded in paragraph 1993(e) are "relevant personal circumstances" as that expression is defined in s 761A of the Corporations Act (see [45] above). Then they submitted that ASIC cannot establish a breach of s 945A(1)(b) or (c) of the Corporations Act if the relevant personal circumstances concerned were not communicated to Storm. Yet, they submitted, there is no allegation in the FASC that the information contained in paragraph 1993(e) was communicated to Storm. It follows, so the Cassimatises submitted, that paragraph 1993(e): either "places an unjustified gloss" on what is pleaded in paragraph 183 of the FASC; or it comprises a "covert attempt" to allege a breach of s 945A(1)(a) on Storm's part by failing to identify the Dodsons' relevant personal circumstances. 52 ASIC submitted that it was not attempting to prove a breach of s 945A(1)(c) by relying upon personal circumstances that were not communicated to Storm. Instead, it submitted that the information pleaded in paragraph 1993(e) was communicated to Storm and this is pleaded in its FASC. To support this submission, ASIC relied upon other parts of its FASC set out above, viz paragraphs 39 to 43 and 183 (and other paragraphs to similar effect). It also pointed to the four different investment risk profiles set out in the Cassimatises' defence, which it implicitly accepted are not set out in the FASC. Based on the facts pleaded in those paragraphs of the FASC and the Cassimatises' defence, ASIC submitted that the effect of the facts pleaded in paragraphs 43(a) and 183 was that the Dodsons accepted the third of the four investment risk profiles described in the Confidential Financial Profile document they completed and that they were therefore not prepared to accept the second of those investment risk profiles. On this basis, it submitted that the latter is what is pleaded in paragraph 1993(e). It therefore concluded its written submissions on the challenge to this paragraph by submitting: The fact those investors did not identify their risk profile as matching the first or second of the [four investment risk profile] boxes is entirely consistent with the allegation in paragraph 1993(e) (and its equivalents) that those investors were not prepared to accept a real risk that some of their assets might be irrecoverably lost. That is information that was communicated to Storm. 53 It may be noted that this submission also suggests that the non-selection of the first investment risk profile was consistent with the allegation in paragraph 1993(e). Since no part of the first investment risk profile is recorded in paragraph 1993(e) and the first and second investment risk profiles deal with different risk related issues, it is difficult to see how this could possibly be so. 54 It does not appear to be in dispute that the relevant personal circumstances that are the focal point of s 945A(1)(a) have to be communicated to Storm in order for these personal circumstances to be the subject of the reasonable consideration and investigation prescribed in s 945A(1)(b) and to affect the appropriateness of the advice under s 945A(1)(c). Nor does it appear to be in dispute that the information pleaded in paragraph 1993(e) was a relevant personal circumstance for Mr and Mrs Dodson of the kind defined in s 761A of the Corporations Act. 55 In essence, the Cassimatises' complaint about paragraph 1993(e) is that there is no pleading in the FASC to the effect that the information about Mr and Mrs Dodson's personal circumstances pleaded in that subparagraph was communicated to Storm. 56 In response to this complaint, ASIC has not sought to identify any part of the FASC where that has been expressly pleaded. Instead, ASIC claims that the communication of that information to Storm can be inferred from facts that are pleaded elsewhere in the FASC. In particular, ASIC points to paragraph 43(a) (set out at [47] above) and the allegation that a Storm investor could only proceed with an investment in accordance with the Storm Model if that investor chose one of the two investment risk profiles described in that subparagraph. While it appears to accept that the four investment risk profiles mentioned in the immediately preceding paragraph (42(a)) are not described anywhere in the FASC, it points out that the third and second of these four options (respectively) are quoted in paragraph 43(a). It claims this can be gleaned from the Cassimatises' defence where all four investment risk profiles are set out. Turning to the Dodsons, ASIC then points to paragraph 183 of the FASC and the allegation that, in order to continue to receive advice in accordance with the Storm Model, the Dodsons identified an investment risk profile which was consistent with the third investment risk profile option available to them. It claims they did this when they completed their Confidential Financial Profile as a part of the Storm Model process (see at [19] above). By selecting the third investment risk profile option, it follows, so ASIC claims, that the Dodsons did not accept the second investment risk profile option. Accordingly, it claims these paragraphs provide the factual basis for the plea in paragraph 1993(e). 57 With the benefit of this elaborate explanation, it is possible to see how ASIC could pursue such a case against the Cassimatises. Whether they ultimately succeed in establishing this case will have to await the trial of these proceedings. However, since this case is based upon a negative inference drawn from a combination of facts pleaded in disparate parts of the FASC, together with some facts that are not pleaded in the FASC at all, before ASIC can be permitted to pursue this case at trial, it will have to give fair and proper notice to the Cassimatises that this is the case they will have to meet. I do not consider that, in its present form, paragraph 1993(e) serves this purpose. In my view, this can be remedied by requiring ASIC to provide the Cassimatises with particulars of the means by which the personal circumstances information described in paragraph 1993(e) was communicated to Storm. I will so order.

(4) PARAGRAPH 2(E) - SECTION 945A(1)(C) - INAPPROPRIATE ADVICE FOR FINANCIAL OBJECTIVES 58 Subparagraph 1993(h) sets out another of the ways in which ASIC alleges the statement of advice provided to Mr and Mrs Dodson on 27 November 2007 was inappropriate to their personal circumstances in breach of s 945A(1)(c) of the Corporations Act. This subparagraph pleads that the advice was inappropriate because Mr and Mrs Dodson could have achieved their stated financial objectives without investing in accordance with the Storm Model by implementing the alternative investment strategy described in subparagraphs (i) to (iii). Subparagraph 1993(h) of the FASC is set out at [46] above. 59 Section 945A(1)(c) is set out above (at [17] and [44]) and does not require repeating here. 60 The Cassimatises submitted that paragraph 1993(h) is defective for four reasons. First, it is embarrassing because that part of the alternative investment strategy described in subparagraph (ii) is inconsistent with the Dodsons' financial objectives as pleaded in paragraph 182(i) (set out at [19] above). In particular, the Cassimatises submitted that "living on the … age pension" is inconsistent with "liv[ing] self sufficiently". Secondly, the Cassimatises submitted that this subparagraph pleads argumentative conclusions rather than material facts. Thirdly, they submitted that no time period is pleaded for the achievement of the Dodsons' financial objectives because the expression "until they each reached retirement age" is meaningless. Finally, they submitted that the allegations in this subparagraph are irrelevant because the Corporations Act does not proscribe advice as inappropriate "merely because" other advice is appropriate. Consequently, they submitted, the pleading in this subparagraph would likely lead to a significant waste of time and expense at the trial of these proceedings. 61 Dealing with each of these submissions in turn, ASIC submitted that whether the approach described in paragraph 1993(h)(ii) amounted to the Dodsons living "self sufficiently" as stated in their Confidential Financial Profile pleaded in paragraph 182(i) was a matter that should be left to be determined at trial. Secondly, ASIC submitted that the facts pleaded in subparagraphs (i) to (iii) are material facts because they describe the alternative investment strategy the Dodsons could have implemented to achieve their stated financial objectives without investing in accordance with the Storm Model. Thirdly, it submitted that the reference to "retirement age" in subparagraph (i), when read in the context of the whole of the contents of the three subparagraphs, was a reference to the age at which the Dodsons would qualify to receive the age pension. This, it submitted, therefore provided a time period for the alternative investment strategy. Finally, ASIC stated that it was not alleging that the advice was inappropriate "merely because" other advice was appropriate. It submitted that the question was whether the advice was appropriate to the Dodsons' financial circumstances and the availability of an alternative investment strategy that was appropriate to those circumstances has a bearing on the answer to that question. 62 Subject to the two matters addressed below (in [63] to [65]), I essentially agree with ASIC's submissions. Specifically, I consider that: (a) what amounts to the Dodsons living "self sufficiently" in this context is a matter that falls to be determined at the trial of these proceedings; (b) it is at least arguable that the appropriateness of the advice to the Dodsons' personal financial circumstances could be affected by the availability of a feasible alternative investment strategy; and (c) for this reason, I do not consider it is accurate to say, as the Cassimatises do, that ASIC is "merely" relying upon this fact. 63 However, this conclusion is subject to two qualifications. In the first place, I do not consider the matters pleaded in subparagraphs (i) to (iii) inclusive are either argumentative conclusions (as the Cassimatises claim), or material facts (as ASIC submits). They are not conclusions because they do not state a deduction or outcome from other facts, but rather they describe the details of the alternative investment strategy the Dodsons could have pursued to achieve their stated financial objectives. For the same reason, I do not consider they are, themselves, material facts. Rather I consider they attempt to provide the details or particulars of the pertinent material fact, namely the alternative investment strategy ASIC alleges was available to the Dodsons. 64 Secondly, even assuming those subparagraphs were intended to serve the latter purpose, I do not consider they provide sufficient particulars of that material fact. Because this alternative investment strategy is put forward as a comparator for the inappropriateness of the investment strategy that was offered to the Dodsons by investing in accordance with the Storm Model, it is incumbent upon ASIC to provide full particulars of the essential components of that alternative investment strategy. Critical to any such retirement investment strategy is the anticipated retirement date. ASIC claims that it is clear from the context of the plea in paragraph 1993(h) that the Dodsons' retirement date, or age, under this alternative investment strategy was to be the date, or age, at which they would qualify for an age pension. I do not consider that is so. In my view, the details pleaded at subparagraphs 1993(h)(i) to (iii) about this essential component are ambiguous at best. For example, subparagraph (i) refers to "retirement age", yet subparagraph (ii) refers to "age pension age". This suggests the two expressions have a different meaning. If they do, then this is such an essential component of this alternative investment strategy that the precise meaning of each expression should be made clear. If they have the same meaning, then the ambiguity should be removed by using the same words to describe that meaning. 65 Further, when the earlier subparagraphs of paragraph 1993 are taken into account, particularly the statement in subparagraph (c) that the Dodsons "were only a few years from retirement" (see at [46] above), I consider an ambiguity may be created by the words of subparagraph (i) and (ii) "[until]/[once] they each reached [retirement age]/[age pension age]". This is so because the words in subparagraph (c) suggest the Dodsons' retirement was to occur at the same time and was imminent. On the other hand, the words in subparagraphs (i) and (ii) suggest that their retirements were to occur when they each reached their proposed retirement age. This creates an ambiguity because it appears from their personal circumstances as disclosed at paragraph 182(a) and (b) of the FASC that Mr Dodson is about five and a half years older than Mrs Dodson and that, as at November 2007, Mrs Dodson was about 10 years away from retirement, assuming she was to retire at her age pension age of 65 years. To remove these ambiguities, I consider that these three subparagraphs of the FASC should be struck out and in their place, ASIC should be ordered to provide particulars of all the essential components of the alternative investment strategy referred to in subparagraph 1993(h).

(5) PARAGRAPHS 2(F) AND 2(H) - LOSS OR DAMAGE 66 These two paragraphs (2(f) and 2(h)) will be considered together because they both concern the pleading of ASIC's case that Storm was exposed to the risk of "adverse legal outcomes". "[A]dverse legal outcomes" is a general expression ASIC has used in its written submissions to describe the various kinds of proceedings that, it alleges, may have been commenced against Storm as a result of the operation of the Storm Model. 67 The nature and degree of this risk exposure is central to ASIC's case against the Cassimatises. This can be seen from the concluding paragraphs of ASIC's FASC where it draws together the main planks of its case against the Cassimatises. Again, using Mr and Mrs Dodson as the examples, those paragraphs (2301 to 2305) state: 2301 In causing and permitting Storm to provide advice to the Part E Investors and the Part F Investors in accordance with the Storm Model the first respondent and the second respondent: (a) exposed Storm to a foreseeable risk of harm in respect of its provision of advice to Mr and Mrs Dodson: (i) in breach of ss.945A(1)(b) and 945A(1)(c) of the Corporations Act as pleaded in paragraphs 1994, 1999 and 2004 above; [The remaining subparagraphs of 2301 proceed along similar lines for each of the alleged breaches of ss 1041E and 912A of the Corporations Act and the alleged breaches of retainer and duty of care in relation to the other Part E investors and for the Part F investors the alleged breaches of s 945A(1)(b) of the Corporations Act.] 2302 The degree of risk to which Storm was exposed (as pleaded in the preceding paragraph) was greater than a director, exercising his or her powers and discharging his or her duties with the degree of care and diligence that a reasonable person would exercise if he or she were in the position of [Mr Cassimatis] or [Mrs Cassimatis], would permit the company to be exposed to. 2303 In the premises pleaded in paragraphs 2301 and 2302 above, in causing and permitting Storm to provide advice to the Part E Investors and the Part F Investors in accordance with the Storm Model: (a) [Mr Cassimatis] failed to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if he or she were in the position of [Mr Cassimatis] and thereby breached his obligations as a director of Storm created by s. 180(1) of the Corporations Act; (b) [Mrs Cassimatis] failed to exercise her powers and discharge her duties with the degree of care and diligence that a reasonable person would exercise if he or she were in the position of [Mrs Cassimatis] and thereby breached her obligations as a director of Storm created by s. 180(1) of the Corporations Act. 2304 At the times that [Mr Cassimatis] and [Mrs Cassimatis] was responsible for and permitted Storm to provide advice to the Part E Investors and the Part F Investors in accordance with the Storm Model, the relevant circumstances of Storm for the purposes of s. 180(1) of the Corporations Act were: (a) the circumstances pleaded in paragraphs 2(d), 2(e), 2(f), 2(g), 2(h) and 2(j) above; (b) the circumstances pleaded in paragraphs 3(d), 3(e), 3(f), 3(g), 3(h) and 3(j) above; (c) the circumstances pleaded in paragraphs 4(b) and 4(c) above; (d) the circumstances pleaded in paragraphs 85 to 172 above; (e) the fact that, where the business of Storm was providing financial product advice, the provision of such advice by Storm in breach of the provisions of the Corporations Act or in breach of its duty of care would expose the company to the risks identified above. 2305 In the premises pleaded in paragraphs 2301, 2302, 2303 and 2304 above, the actions of [Mr Cassimatis] and [Mrs Cassimatis] in causing and permitting Storm to provide advice to the Investors to invest in accordance with the Storm Model: (a) materially prejudiced the interests of Storm; and/or (b) were serious. (Struck out sections and underlining excluded) 68 The kind of proceedings to which paragraph 2(f) allegedly relates are civil proceedings under s 953B of the Corporations Act. In relation to the Part E investors, the exemplar paragraph for this category is paragraph 1994 (specifically subparagraph 1994(b)(iii) which is emphasised below) as follows: In the premises, by providing the recommendations contained in the Statement of Advice dated 27 November 2007 to Mr and Mrs Dodson, Storm: (a) breached ss.945A(1)(b) and 945A(1)(c) of the Corporations Act; (b) was thereby exposed to a risk of: (i) being found guilty of an offence pursuant to s.1311 of the Corporations Act; (ii) becoming liable, upon conviction, to be punished by a penalty not exceeding the penalty set out in item 270A of Schedule 3 of the Corporations Act; (iii) civil proceedings brought by Mr and Mrs Dodson pursuant to s.953B of the Corporations Act; (iv) ASIC taking action against it under: (A) s.915C of the Corporations Act; (B) s.920A of the Corporations Act; (C) s.1101B of the Corporations Act; (c) the aforesaid risk was foreseeable. (Emphasis added) 69 In relation to the Part F investors, the exemplar paragraph for this category is paragraph 2228 (again, specifically subparagraph 2228(b)(iii), which is emphasised below) as follows: In the premises, by creating advice in accordance with the process pleaded in paragraphs 44 to 61 above and paragraphs 71 to 83 above and providing that advice to the Part F Investors, Storm: (a) breached s.945A(1)(b) of the Corporations Act; (b) was thereby exposed to a risk of: (i) being found guilty of an offence pursuant to s.1311 of the Corporations Act; (ii) becoming liable, upon conviction, to be punished by a penalty not exceeding the penalty set out in item 270A of Schedule 3 of the Corporations Act; (iii) civil proceedings brought by the Part F Investors pursuant to s.953B of the Corporations Act; (iv) ASIC taking action against it under: (A) s.915C of the Corporations Act; (B) s.920A of the Corporations Act; (C) s.1101B of the Corporations Act; (c) the aforesaid risks were foreseeable. (Emphasis added, underlining and struck out passages omitted) 70 The kind of proceedings to which paragraph 2(h) allegedly relates are civil proceedings for breach of Storm's retainer with, and duty of care to, each of the Part E investors. This aspect of ASIC's case is pleaded in Part I of its FASC, which is entitled "Negligence and breach of retainer by Storm". While the only exemplar paragraph within Part I is paragraph 2289, for contextual purposes, it is appropriate to set out all of the paragraphs in that Part (paragraphs 2284 to 2291). They are as follows (using Mr and Mrs Dodson as examples): 2284 Storm provided the advice contained in each of the Statements of Advice and the Statements of Additional Advice pleaded in respect of the Part E Investors pursuant to a retainer entered into between Storm and each of the Part E Investors who received the Statements of Advice and the Statements of Additional Advice. 2285 The retainer between Storm and each of the clients is to be inferred from the following steps in the process of investing in accordance with the Storm Model which were common to all of the clients: (a) attendance by the client at a Storm education seminar; (b) the completion by the client of a confidential financial profile at a meeting with an authorised representative or employee representative of Storm; (c) the provision of Storm's Financial Services Guide to the client; (d) the attendance by the client at a meeting with an authorised representative or employee representative of Storm to review and approve the cashflow analysis prepared by the head office of Storm; (e) the attendance by the client at a meeting with an authorised representative or employee representative of Storm to receive a Statement of Advice prepared by the head office of Storm; (f) the completion by the client of the authority to implement the investment recommended in the Statement of Advice. 2286 It was an implied term of each of those retainers, the term being implied at law, that Storm would exercise reasonable care and skill in the provision of financial advice to the client who received the Statement of Advice or Statement of Additional Advice. 2287 Further: (a) to the knowledge of Storm, each of the Part E Investors relied upon the financial advice provided by Storm as set out in the Statements of Advice and Statements of Additional Advice pleaded above: Particulars (A) Reliance by Mr and Mrs Dodson on the financial advice provided by Storm is to be inferred from the facts pleaded in paragraphs 194 to 196, 203 to 204 and 209 above; [The remaining particulars of 2287(a) proceed along similar lines in relation to each of the other 9 Part E investors.] (b) Storm assumed responsibility to each of the Part E Investors for the financial advice it provided to those clients; (c) it was reasonably foreseeable that Part E Investors would suffer loss in the event that Storm failed to exercise reasonable care and skill in the provision of financial advice to those clients; (d) in the premises, Storm owed a duty to Part E Investors to exercise reasonable care and skill in the provision of financial advice to those client (sic). 2288 In breach of both the implied term of the retainer with each of the Part E Investors and the duty which Storm owed to each of those clients, Storm provided advice to each of those clients which: (a) did not have any, or any appropriate, regard to the personal circumstances of the client to whom the advice was addressed as pleaded in: (i) paragraphs 1992, 1997 and 2002 above in respect of Mr and Mrs Dodson; [The remaining subparagraphs of 2288(a) proceed along similar lines in relation to each of the other 9 Part E investors.] (b) was not appropriate to the personal circumstances of the client to whom it was addressed as pleaded in: (i) paragraphs 1993, 1998 and 2003 above in respect of Mr and Mrs Dodson; [The remaining subparagraphs of 2288(b) proceed along similar lines in relation to each of the other 9 Part E investors.] (c) a reasonably competent and prudent financial adviser would not have given to those client. 2289 Each of the Part E Investors suffered loss as a consequence of Storm's breach of retainer and breach of duty. Particulars (A) The loss suffered by Mr and Mrs Dodson is pleaded in paragraph 217 above. Further particulars of loss will be provided prior to trial. [The remaining particulars of 2289 proceed along similar lines in relation to each of the other 9 Part E investors.] 2290 In the premises pleaded in paragraphs 2284 to 2289 above, by providing the advice contained in the Statements of Advice and the Statements of Additional Advice pleaded in respect of the Part E Investors, Storm became liable to a foreseeable risk of civil proceedings for negligence and breach of contract being instituted by each of the Part E Investors. 2291 The degree of risk to which Storm was exposed (as pleaded in the preceding paragraph) was greater than a director, exercising his or her powers and discharging his or her duties with the degree of care and diligence that a reasonable person would exercise if he or she were in the position of [Mr Cassimatis] or [Mrs Cassimatis], would permit the company to be exposed to. 71 At this point it is convenient to note that there is an important difference between the first two exemplar paragraphs above and the third, in relation to the treatment of the issue of loss or damage. That is that neither paragraph 1994 (at [68] above), nor paragraph 2228 (at [69] above), contains any allegation that any of the investors concerned suffered any loss or damage as a result of Storm's alleged breaches of s 945A(1)(b) (or (1)(c)) of the Corporations Act. In other words, it is the alleged breach of that section alone that is claimed to give rise to the risk of exposure to civil proceedings under s 953B of the Corporations Act. By comparison, paragraph 2289 expressly pleads that each of the Part E investors suffered loss as a consequence of Storm's breach of retainer and duty of care and particulars of that loss are given by reference to earlier paragraphs of the FASC. Using Mr and Mrs Dodson as an example, the pleading in relation to their loss is contained in paragraph 217 as follows: In consequence of the following the (sic) recommendations made by Storm, as more particularly pleaded in paragraphs 191 to 207 above, Mr and Mrs Dodson: (a) lost their Colonial First State managed investment of approximately $65,000.00; (b) are indebted to BOQ for approximately $287,000.00 on the home loan and a further sum of approximately $27,000.00 on the line of credit; (c) hold approximately $197,000.00 in a home loan offset account. 72 Furthermore, the particulars section of paragraph 2289 states that "[f]urther particulars of loss will be provided prior to trial". 73 As at November 2007, s 953B of the Corporations Act relevantly provided: (1) This section applies in the following situations: (a) a person: (i) is required by a provision of this Part to give another person (the client) a disclosure document or statement (the required disclosure document or statement); and (ii) does not give (within the meaning of section 940C) the client anything purporting to be the required disclosure document or statement by the time they are required to do so; or (b) a person: (i) gives another person (the client) a disclosure document or statement that is defective in circumstances in which a disclosure document or statement is required by a provision of this Part to be given to the client; or (ii) is a financial services licensee and gives, or makes available to, another person (the client) a disclosure document or statement, being a Financial Services Guide or a Supplementary Financial Services Guide, that is defective, reckless as to whether the client will or may rely on the information in it; or (c) a person contravenes section 945A, 945B, 949A or 949B. In paragraph (b), give means give by any means (including orally), and is not limited to the meaning it has because of section 940C. (2) In a situation to which this section applies, if a person suffers loss or damage: (a) if paragraph (1)(a) applies--because the client was not given the disclosure document or statement that they should have been given; or (b) if paragraph (1)(b) applies - because the disclosure document or statement the client was given was defective; or (c) if paragraph (1)(c) applies - because of the contravention referred to in that paragraph; the person may, subject to subsection (6), recover the amount of the loss or damage by action against the, or a, liable person (see subsections (3) and (4)), whether or not that person (or anyone else) has been convicted of an offence in respect of the matter referred to in paragraph (a), (b) or (c). … 74 It should be recorded that none of the exceptions identified in sub-s (6) is presently relevant and it does not appear to be in dispute that, as a financial services licensee, Storm was a "liable person" under sub-s (3). 75 In relation to paragraph 2(f), the Cassimatises began by underscoring the observation set out in [71] above, viz that there is no allegation in the FASC that any of the Part E or Part F investors suffered any loss or damage as a result of any of the alleged breaches of s 945A(1)(b) or (1)(c) such as to found any proceedings under s 953B of the Corporations Act. Since loss or damage is an essential element of any civil proceedings under s 953B(2), the Cassimatises submitted that these parts of ASIC's case cannot be maintained against them. 76 In relation to paragraph 2(h), the Cassimatises made a number of criticisms of the way in which the alleged loss has been pleaded. In no particular order, they submitted that no causative link is pleaded between the alleged breaches of retainer and duty of care and the loss that has been particularised in paragraph 2289. Further, they claimed that no attempt is made in the FASC to quantify the loss allegedly sustained. Finally, they submitted that ASIC has pleaded a global loss claim when such a claim is impermissible. That is so, they submitted, because a global loss claim is only available when the alleged breach is the only material cause of the loss and, in this case, ASIC will not be able to exclude the aftermath of the Global Financial Crisis as a material cause of the loss. 77 In response to the Cassimatises' submission in relation to paragraph 2(f), ASIC submitted that its claim is directed to the risk to which Storm was exposed of, among other things, having civil proceedings commenced against it as a result of its breaches of s 945A(1) of the Corporations Act. It submitted that if it can establish that the alleged breaches occurred, the existence and degree of the risk in question will fall to be determined by the likelihood of some, or all, of the Part E and Part F investors commencing civil proceedings against Storm. It submitted that it does not need to allege that those investors suffered actual loss or damage to make this allegation. Specifically, ASIC submitted it does not need to plead loss or damage as an essential element of any civil proceeding that could be brought against Storm under s 953B of the Corporations Act. 78 In response to the Cassimatises' submission on paragraph 2(h), ASIC submitted that it is not seeking to recover loss in these proceedings, nor plead any such claim for loss. Instead, it claims that Storm was exposed to a risk that one or more of the Part E investors would issue proceedings to recover the loss they sustained by reason of the breach of retainer and duty of care. ASIC submitted that it was only required to plead the facts which "led to a reasonable inference" that the acts complained of and the later event have a relationship of cause and effect. It submitted that it does not therefore need to plead the actual loss the Part E investors suffered, nor quantify that loss in its FASC. 79 The words of s 953B(2): "… if a person suffers loss or damage … because of the contravention … the person may … recover the amount of the loss or damage by action against the, or a, liable person …", plainly enough create a statutory cause of action. As with analogous statutory causes of action, loss or damage is the gist of it: see, for example, Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 (Wardley) at 525. Further, the words: "… because of the contravention …" also introduce notions of causation similar to those raised by terminology to like effect in analogous statutory provisions: see Wardley at 525. It follows that, for present purposes, the statutory cause of action under s 953B has three essential elements to it. They are: (a) a contravention of s 945A(1): see s 953B(1)(c); (b) a person suffers loss or damage: see s 953B(2); and (c) that loss or damage was suffered because of the contravention of s 945A(1): see s 953B(2)(c). 80 It does not appear to be in dispute in this matter that the second and third of these three essential elements are not pleaded as material facts in paragraph 1994, or paragraph 2228, or anywhere else in the FASC for that matter. Without the Storm investors concerned having allegedly suffered some loss or damage and/or without the contravention of s 945A(1) by Storm having allegedly caused those investors to suffer that loss or damage, I do not consider any civil proceedings could be commenced against Storm under s 953B(2) of the Corporations Act. If no such civil proceedings could be commenced against Storm, it necessarily follows, in my view, that ASIC cannot maintain its allegations in subparagraphs 1994(b)(iii) and 2228(b)(iii) that Storm was exposed to a risk of such civil proceedings. 81 It necessarily follows from this conclusion that I do not accept ASIC's submission that these material facts about loss or damage and causation are, in effect, incorporated in its plea that Storm breached s 945A(1), on the premise that any such breach by Storm must carry with it the risk of loss or damage being caused to the investors concerned. There are, in my view, two difficulties with this submission. The first is that it is not directed to the risk that is pleaded in subparagraphs 1994(b)(iii) and 2228(b)(iii). The risk pleaded in those subparagraphs is the risk of the nominated civil proceedings being commenced against Storm. Of course, the existence of that risk is, in turn, dependent upon all the elements of those civil proceedings being present, or at least at this pleadings stage of these proceedings, being alleged in the FASC. It therefore seems that this submission is really directed to those elements, viz that the investors concerned suffered loss or damage because of Storm's breach of s 945A(1). On this, ASIC propounds that Storm's breach of that section must carry with it the risk of that loss or damage being caused to those investors. Whether a risk of suffering loss or damage is sufficient to establish the essential elements of the civil proceedings described in s 953B, in the circumstances of this case, is not a question that falls to be determined on this interlocutory strike out application. Instead, the question is whether ASIC has pleaded the material facts necessary to establish those elements. In my view, ASIC's reliance on the mere allegation of breach of s 945A(1) is not sufficient for that purpose. 82 For these reasons, I do not consider ASIC has pleaded all the material facts necessary to make out the essential elements of the statutory cause of action underpinning the civil proceedings pleaded in subparagraphs 1994(b)(iii) and 2228(b)(iii) such that it can allege that there was a risk of those civil proceedings being commenced against Storm. I will therefore order that those subparagraphs of the FASC be struck out. The question then is whether ASIC should be given leave to replead those subparagraphs. As noted earlier in these reasons, the Cassimatises have opposed any such leave being granted. For the reasons that follow, I do not consider that opposition should prevail. The civil proceedings described in subparagraphs 1994(b)(iii) and 2228(b)(iii) are just one of five forms of proceedings pleaded in those subparagraphs, each of which is alleged to be an independent source of the risk of adverse legal outcomes to which ASIC claims Storm was allegedly exposed. The other four proceedings are proceedings under sections: 1311, 915C, 920A and 1101B of the Corporations Act: see [68] and [69] above. Thus, the removal of the s 953B civil proceedings described in subparagraphs 1994(b)(iii) and 2228(b)(iii) from that group of five proceedings, for reasons peculiar to the way in which the allegations about those proceedings are pleaded in the FASC, does not logically affect ASIC's entitlement, or ability, to pursue the other four forms of proceedings as sources of the risk to which Storm was allegedly exposed. 83 From the Cassimatises' perspective, if they already have to meet that case in relation to those other four forms of proceedings, there will be no obvious unfairness or injustice involved in them having to meet that case in relation to the civil proceedings under s 953B described in those subparagraphs, should ASIC be able to amend them to remedy the defect described above. This lack of unfairness or injustice to the Cassimatises is reinforced by the fact that ASIC has already pleaded similar material facts (albeit in relation to two different causes of action) in Part G of the FASC, specifically paragraph 2289, in relation to another source of adverse legal outcomes to which Storm was allegedly exposed, namely proceedings being commenced against it by the Part E investors for alleged breaches of retainer and duty of care (see [71] above). For these reasons, I consider that ASIC should be given leave to replead this particular aspect of its case against the Cassimatises, if it wishes to do so. To refuse leave would, in my view, allow a deficiency of form in ASIC's pleading to defeat what may be an important aspect of its substantive case against the Cassimatises. In reaching this conclusion, I have taken into account the considerations discussed by the High Court in Aon Risk Services v Australian National University (2009) 239 CLR 175; [2009] HCA 27 and, in that regard, it should be noted that, at this stage, the trial of these proceedings is not due to commence until some 12 months hence. 84 As I have alluded to immediately above, the position in relation to paragraph 2(h) is quite different. Paragraph 2289 follows on from a series of allegations to the effect that Storm breached its retainer with, and duty of care to, each of the Part E investors. In that paragraph, ASIC alleges that each of the Part E investors "suffered loss as a consequence of Storm's breach of retainer and breach of duty": see at [70] above. The loss allegedly suffered is then particularised. In the case of Mr and Mrs Dodson, the particularisation is undertaken by reference to paragraph 217 of the FASC where three items of loss are set out (see at [71] above). Furthermore, as noted above (at [72]), ASIC has given notice in paragraph 2289 that further particulars of loss will be provided prior to the trial of these proceedings. It follows that, unlike with subparagraphs 1994(b)(iii) and 2228(b)(iii), the material facts going to the issues of loss, and causation of that loss, have been expressly pleaded. Whether those allegations of fact can be established by evidence is a question that will have to be determined at the trial of these proceedings. However, it is not appropriate to determine those sorts of issues in this interlocutory strike out application. 85 As to questions the Cassimatises have raised about the pleading of the quantification of loss in paragraph 2289, I consider ASIC has made a valid point. In these proceedings, ASIC does not seek to recover the loss allegedly suffered by the Part E investors. It does not therefore need to prove the full extent of the loss suffered by, for example, Mr and Mrs Dodson, as if it were standing in their place pursuing civil proceedings against Storm for that loss. Instead, ASIC seeks to establish that sufficient loss was caused by Storm's alleged breaches that there was "a foreseeable risk of civil proceedings for negligence and breach of contract being instituted by each of the Part E investors" (see paragraph 2290 of the FASC at [70] above). Thus, ASIC only needs to establish that, for example, Mr and Mrs Dodson suffered sufficient loss from Storm's alleged breaches of retainer and duty of care that they may have taken civil proceedings against Storm to recover that loss. 86 In oral submissions, Mr Cooper did not shirk from the proposition that ASIC may seek to prove that sufficient loss by employing a "global loss" approach of the kind criticised by the Cassimatises in their submissions. Assuming ASIC pursues that approach, it will probably become necessary to give pre-trial directions to ensure that this aspect of the trial proceeds efficiently. These may include directions setting a time frame for the provision of the further particulars of the loss ASIC has already proffered in the particulars to paragraph 2289 (see at [72] above). They may also include appropriate directions to ensure that any expert evidence that is to be given in support of this approach is efficiently managed at trial. Nonetheless, I do not consider that Mr Cooper's intimation provides any justification for giving those kinds of directions at this stage of these proceedings, much less do I consider it provides any justification for striking out the allegations in paragraph 2289 of the FASC. For these reasons, I reject the Cassimatises' challenge under paragraph 2(h). 87 I should add that in making these observations about paragraphs 1994, 2228 and 2289, I am not expressing a view on whether, for the purposes of ultimately establishing that the Cassimatises breached s 180(1), it is necessary for ASIC to plead that the Part E and/or Part F investors actually suffered loss, as distinct from pleading that the Cassimatises knew at the time Storm allegedly contravened s 945A (or breached its retainer and duty of care with the investors) that, as a result, there was a risk that the investors would suffer loss. That issue, in my view, is one that should be determined at the trial of these proceedings.

CONCLUSION 88 For the reasons given above, I have concluded that: (a) subparagraphs 1994(b)(iii) and 2228(b)(iii) should be struck out and ASIC should be given leave to replead those aspects of its case if it so wishes: [82] to [83] above; (b) subparagraph 1993(h)(i) to (iii) should be struck out and ASIC should instead be ordered to provide particulars of that subparagraph: see (c)(vi) below; (c) ASIC should be ordered to provide particulars of the following facts: (i) the recommendations that are referred to in subparagraph 1992(a): [30] above; (ii) the parts of the statement of advice that are referred to in subparagraph 1992(d) that are not pro forma in nature: [34] above (iii) the pro forma statements that are referred to in subparagraph 1992(g): [42] above; (iv) the parts of the statement of advice that are referred to in subparagraph 1992(g) that involved any consideration or investigation of an investment strategy other than that offered by the Storm Model: [42] above; (v) the means by which the personal circumstances information described in subparagraph 1993(e) was communicated to Storm: [57] above; and (vi) the essential components of the alternative investment strategy that is referred to in paragraph 1993(h): [65] above. (d) otherwise the Cassimatises' challenges contained in paragraph 2 of its interlocutory application should be rejected. 89 It can be seen from this summary of my conclusions that neither party has been completely successful in relation to the matters raised by paragraph 2 of the Cassimatises' interlocutory application. In addition to paragraph 2 of their application, the Cassimatises have sought a number of other orders (paragraphs 3 - 5 inclusive). They are: (a) to strike out the whole of the FASC on the grounds that "the parts that then remain are likely to cause prejudice, embarrassment or delay in the proceedings, and fail to disclose a reasonable cause of action or other case appropriate to the nature of the pleading" (paragraph 3(a)); (b) to dismiss the proceedings, in the Court's inherent jurisdiction, and/or on the grounds that "[ASIC], having been invited again to remedy the defects in the [FASC], has not applied for leave under rule 16.53 further to amend its pleading, and/or that further prosecution of the proceeding would, in the circumstances, be vexatious" (paragraph 3(b)); (c) costs of the application and the proceedings (paragraph 4); (d) such further or other order as to the Court seems just (paragraph 5). 90 The order sought in [89(a)] above might have been available if the Cassimatises had been successful in striking out critical parts of the FASC such that the remainder either could not be maintained as a matter of law, or should not be maintained as a matter of justice. However, it is unnecessary to consider whether either of those situations has arisen because the Cassimatises have not achieved anywhere near that level of success in this application. As I have observed at [82] to [83] above, they have, at best, been successful in their challenge to one of five independent bases for that particular aspect of ASIC's claim that Storm was exposed to the risk of adverse legal outcomes. For these reasons, the grounds relied upon to support the order sought in [89(a)] above have not been made out and that particular part of the Cassimatises' application must be rejected. 91 The order described in paragraph [89(b)] above is based on similar grounds to those mentioned earlier in these reasons: see at [9] above. My reasons for rejecting those submissions and for refusing to make this order are as follows. The invitation that underpins the Cassimatises' position on this aspect of their application is contained in the correspondence that passed between the legal advisers for the parties in the lead up to the filing of the application. The final letter in that chain of correspondence attached a copy of the draft application the Cassimatises proposed to file and expressed that invitation in these terms: If you believe that any of the above objections may be met by the provision of further particulars, we invite you to say so. While on that point, we observe that the Statement of Claim foreshadows the provision of particulars in the future. The case is now 14 months old, following a two year investigation. Please advise when these particulars will be provided. As to particulars, the Application that our clients intend to make does not involve any complaint of a want of particulars. If the pleading escapes unscathed, there are many requests for particulars that our clients would wish to make. It is, obviously, unnecessary o (sic) do so, prior to the hearing of the attached Application. We close by observing again that, despite our previous objections, you have said that your client does not intend to amend its pleading. You are aware of our clients' straitened financial circumstances. With the third edition of the pleading in hand, your client should not be hedging its bets, to use a colloquial expression. 92 The earlier parts of this letter set out the reasons why various parts of ASIC's FASC should be struck out. Insofar as they related to the challenges that have been pursued in this application, those reasons were substantially identical to the submissions that were made on behalf of the Cassimatises in this application. The overall thrust of this letter is that ASIC's FASC contained a large number of significant defects, none of which could be cured by ASIC providing particulars even though it was invited to do so, if it wished. 93 In the end result, the Cassimatises have succeeded in this application in establishing one significant defect in the FASC affecting one of five independent forms of proceedings supporting a particular aspect of ASIC's case (see the discussion at [82] to [83] above). Put differently, and using the words of the Cassimatises' lawyers' letter above, almost every substantive allegation in the FASC has "escape[d] unscathed". It necessarily follows that the Cassimatises have manifestly failed to establish their nominated ground for obtaining the order described in [89(b)] above. 94 As to the order sought by [89(c)] above, since neither party has been entirely successful in this application, I do not propose to make any order for costs. Finally, there is no need to make any further orders as anticipated by [89(d)] above. 95 My conclusion that there should be no order for costs in this application leads me to add these closing observations. This part of the Cassimatises' application was, from beginning to end, a pleadings dispute. That is, a dispute about how ASIC's case is framed, rather than about whether it has a case (which was the object of the first part of this application, ie the summary judgment application), or whether ASIC has been able to establish its case at trial. 96 The case ASIC wishes to bring against the Cassimatises is undoubtedly a large and complex one. I endeavoured to summarise its size and complexity in my summary judgment reasons when I said (at [109]) that: The pleadings in these proceedings therefore set out in enormous detail the history of the development of the Storm Model and its use to provide financial advice to an identified group of Storm customers. They cover a nine year period (approximately) from about 2000 to late 2008 (inclusive). Among the Part E and Part F investors who are the central focus of ASIC's FASC are 46 couples or individuals comprising some 77 individuals in total (17 Part E investors and 60 Part F investors). Each such investor is alleged to have been involved in numerous occasions when financial advice was provided in accordance with the Storm Model. Each of these occasions is then alleged to have lead to breaches by Storm of various provisions of the Corporations Act, including: ss 912A(1)(a), 912A(1)(c), 945A(1)(b), 945A(1)(c) and 1041E(1). As is already noted above (at [79]), more than 200 such occasions are described in the FASC. Together, these occasions gave rise to hundreds of individual transactions. They also involved scores of individuals employed by Storm, or associated with a range of financial institutions that provided loans to those investors. For their part, the Cassimatises have in their defence raised a host of other factual issues that they claim are germane to their defence. In short, the factual and legal issues that are in dispute on the face of the pleadings in these proceedings are extensive, complex and, on the basis of the Cassimatises' defence, widely contested. 97 In Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82; [2006] WASC 281 (Barclay), Martin CJ was confronted with a similar pleadings dispute. At [4] to [6] of that decision, his Honour described the contemporary purpose of pleadings and their role as a part of contemporary case management techniques. Based on those observations, his Honour highlighted the need to take a more robust approach to disputes about pleadings and outlined what that approach should generally entail (at [7] to [8]) as follows: 7. In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment. 8. Most pleadings in complex cases, and this is a complex case, can be criticised from the perspective of technical pleading rules that evolved in a very different case management environment. In my view, the advent of contemporary case management techniques and the pre-trial directions, to which I have referred, should result in the court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at trial should those criticisms be seriously entertained. 98 His Honour then proceeded to apply that robust approach in that particular case in the following manner (at [9] to [10]): 9. In this case, I have reviewed the statement of claim and the objections to it and I have done so in the case management context to which I have referred. It is my view, that many of the objections which have been taken are pedantic and pettifogging in nature. In many cases, elucidating and resolving the objection would consume an amount of time and resources, which is entirely disproportionate to the benefit to be derived from that process in terms of the identification of the true issues which have to be met in the case. 10. In many cases, consideration and determination of each objection would give rise to precisely the type of time and resource wasting forensic exercise which the Commercial and Managed Cases List was created to discourage. That is not to say that buried within those voluminous objections there might not be a criticism that should properly be seriously entertained, but having looked myself at the statement of claim, it is my view that any lawyer looking at that pleading, genuinely interested in knowing what issues are to be tried and the case that has to be met, would have no difficulty in ascertaining those matters. 99 The approach Martin CJ outlined in Barclay, and proceeded to employ, undoubtedly avoided the sort of "time and resource wasting forensic exercise" in that case that I regret to say has occurred in this case. Picking up on another part of his Honour's observations in Barclay, I would describe this application as involving the expenditure of "an amount of time and resources, which is entirely disproportionate to the benefit to be derived from that process in terms of the identification of the true issues which have to be met in the case". The decision in Barclay and the decision in this application provide a stark contrast between the efficiency that can be achieved by robust case management and the waste of time and resources that occurs when a judge agrees to entertain pleadings disputes of this kind. For my part, with the value of hindsight, I can now see it would have been far more preferable if I had, in this application, adopted an approach similar to that adopted in Barclay. 100 Insofar as the parties to these proceedings and their lawyers are concerned, I would make these observations. Many of the Cassimatises' objections to ASIC's FASC, in my view, fell within the expression "pedantic and pettifogging in nature" used by Martin CJ in Barclay. The objection about the meaning of paragraph 193 of the FASC is a good example. In my view, that objection had all the hallmarks of, what I will describe as, opportunistic, self-serving, incomprehension. In view of the Cassimatises' claim to be in "straitened financial circumstances" (see the letter at [91] above), one would have thought that they had every incentive to avoid their time and resources being wasted on these sort of objections. Quite apart from this incentive, they are obliged by Part VB of the Federal Court of Australia Act 1976 (Cth) to achieve the just, quick, inexpensive and efficient resolution of these proceedings. 101 On the other hand, the need for most, if not all, of the particulars that ASIC will be ordered to provide to the Cassimatises should have been obvious to its lawyers on a fair and open-minded (as distinct from a technical and unbending) reading of its FASC. If it had undertaken that exercise when it first was asked to do so before this application was filed, the time and resources that have been wasted on this application may have been avoided. Similarly, if ASIC had given the elaborate explanation about its pleading in paragraph 1992(e) that it eventually gave in submissions in this application, this waste may have been avoided. Its failure to adopt this more sensible approach to this application is inconsistent with its Part VB obligations mentioned above. And, in this respect, it is worth emphasising ASIC's role as a model litigant: see, for example, Australian Securities and Investments Commission v Hellicar (2012) 286 ALR 501; [2012] HCA 17 at [239]. I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.