The Cassimatises have failed to establish a prima facie case
137 The ordinary meaning of the phrase "prima facie" is "at first sight; on the face of it; as appears at first sight without investigation": see North Ganalanja Aboriginal Corporation v Queensland (1996) 185 CLR 595 at 616. The case the Cassimatises seek to establish on a prima facie basis has already been identified earlier in these reasons: see at [8] above. It is that no reasonable director in their position at the relevant times would have been aware of the risks to Storm that are now pleaded against them by ASIC, or alternatively that if such a reasonable director would have been aware of the pleaded risks to Storm, he or she would not have concluded that those risks were unacceptably high. It is, of course, necessary to keep firmly in mind that the Cassimatises' broader purpose in seeking to establish this prima facie case is to show that ASIC has no reasonable prospects of successfully prosecuting these proceedings. So, the pertinent question at this point is whether the Cassimatises' affidavit evidence, taken at first sight and without investigation, establishes a prima facie case on these issues.
138 The matters the Cassimatises have identified can be broadly described as the foreseeability issue pleaded in ASIC's FASC. That issue encapsulates the kind, and degree or level, of the risk to which Storm was allegedly exposed. The kind of foreseeable risk concerned is pleaded throughout the FASC: see, for example, para 2301 to 2304 at [72] above; para 1994 at [74] above; and para 2290, which is paraphrased at [75] above. It has been described as the risk of "adverse legal outcomes" (see paras 14 and 15 in the summary at [71] above) posed to Storm from variously:
(a) being found guilty of, convicted and penalised for, a number of specified offences under the Corporations Act;
(b) being subjected to civil proceedings by one or more of the Part E or Part F investors under s 953B, or for negligence, or for breach of contract; and
(c) being subjected to regulatory proceedings at the suit of ASIC.
139 Thus, the foreseeability of that kind of risk depends upon the characterisation of Storm's conduct on each of the 200 or more occasions on which the Storm Model was allegedly employed to provide financial advice to the 46 Part E and Part F investors: see at [73] and [79] above. It therefore calls for an assessment of that conduct in the particular circumstances that applied on each of those 200 or more occasions to determine whether one or more of the various provisions of the Corporations Act were breached as alleged; or the terms of the applicable contract were breached as alleged, or the relevant duty of care was negligently breached as alleged. For example, in relation to the alleged breaches of the provisions of the Corporations Act, that will require, with respect to the statement of advice dated 27 November 2007 provided to Mr and Mrs Dodson, determining at least the following questions:
(a) whether the Storm Model, including its concomitant processes (see at [78] above) was used to provide that financial advice;
(b) if it was used, whether by its use:
(i) Storm failed to conduct such consideration or investigation in relation to the subject matter of the advice as was reasonable in all the circumstances (see para 1992(a) at [74] above), or
(ii) Storm failed to provide advice that was appropriate to the personal circumstances of the Dodsons (see para 1993 at [74] above); and finally,
(c) if it was used, whether the Cassimatises were responsible for causing Storm to use it to provide that financial advice in that way.
140 Significantly, in their defence, the Cassimatises have put in issue many of these matters (above). This can be seen by reference to their response to the allegations made in respect of the statement of advice provided to Mr and Mrs Dodson dated 27 November 2007. They variously claim that those allegations proceed "upon a misapprehension of the facts and a misunderstanding of the Storm Business Model and the circumstances of Mr and Mrs Dodson". They also variously rely upon "the true facts" pleaded elsewhere in their defence; the true meaning and effect of the documents concerned; whether the investments involved providing a "financial product"; and whether the advice was provided in accordance with the Storm Model (see at [83] to [92] above).
141 The other component of the foreseeability issue identified by the Cassimatises and pleaded in ASIC's FASC is the degree or level of the risk of adverse legal outcomes posed to Storm: see, for example, para 1995 at [74] above and para 2291 at [75] above. That is, if the kind of risk alleged was foreseeable at all, whether the degree or level of that risk was such that a reasonable person in the position of the Cassimatises exercising his or her functions with due care and skill, would not have taken that risk. This degree or level of risk therefore falls to be determined by reference to the degree of care and skill that would have been employed by a reasonable person in the position of the Cassimatises, as directors of Storm. As Brereton J pointed out in Maxwell at [100]-[101], this requires a consideration of the circumstances in which both the company and the director concerned were placed, including (from [100] of Maxwell):
… the type of company, the provisions of its constitution, the size and nature of the company's business, the composition of the board, the director's position and responsibilities within the company, the particular function the director is performing, the experience or skills of the particular director, the terms on which he or she has undertaken to act as a director, the manner in which responsibility for the business of the company is distributed between its directors and its employees, and the circumstances of the specific case.
142 Consistent with these observations, the circumstances of both the Cassimatises and Storm that ASIC relies upon are pleaded in its FASC: see at [80]-[82] above. While most of those circumstances have been admitted by the Cassimatises in their defence (see at [91] above), it is significant that the central allegations about their role in managing Storm; and in setting up and/or structuring Storm such that its business was that of advising its clients to invest in accordance with the Storm Model, are denied: see at [91(a) and (b)] and [92] above.
143 It can be seen from this brief survey of the foreseeability issue as pleaded in ASIC's FASC that this issue involves a complex set of factual issues involving, first, the circumstances that existed on each of the 200 or more occasions when financial advice was allegedly provided by Storm in accordance with the Storm Model to the 46 couples or individuals that make up the Part E and Part F investors, to determine whether that advice gave rise to the adverse legal outcomes as alleged. Secondly, it involves an equally complex set of factual issues bearing on the circumstances of Storm, as a company, and the Cassimatises, as its executive directors, to determine their role in, and responsibility for, those adverse legal outcomes. The scope, size and complexity of all these factual issues, as raised by the pleadings in these proceedings, is summarised at [109] above. All this serves to underscore the difficulty of the task the Cassimatises have undertaken in attempting to establish a prima facie case directed to this foreseeability issue.
144 Added to this difficulty is the broader purpose of this application mentioned above (at [137]), viz to show that ASIC has no reasonable prospects of successfully prosecuting these proceedings. That essentially means that the prima facie case the Cassimatises need to establish will have to serve as a means to the ultimate end of showing that there is no real question of fact to be determined in these proceedings on this foreseeability issue. As is already noted above, they could do that by showing that the questions of fact raised on the pleadings can truly be described as fanciful, trifling, implausible, improbable, et cetera, or that they are contradicted by all the available documents or other materials: see at [47] above. They could also achieve that end by showing that a critical question of fact raised on the pleadings is not maintainable, for example, by providing evidence of an alibi defence (see Fortron at [20]), or perhaps by providing evidence of a limitations defence. Having regard to the detail and substance of the allegations in ASIC's FASC and to the fact that ASIC is pursuing these proceedings in its role as the regulator under the ASIC Act, I do not consider those allegations could be described as fanciful, trifling, implausible, improbable, et cetera. Indeed, I do not understand the Cassimatises to be advancing such a case on this aspect (the second and third grounds) of their summary judgment application. Instead, the Cassimatises appear to be claiming that the foreseeability issue is not maintainable because the foreseeability of the risk or, alternatively, the foreseeability of the degree of that risk, is contradicted by the whole history of the conduct of Storm's financial advice business over the relevant period. So, with these observations in mind, it is now appropriate to turn to the Cassimatises' affidavits to determine whether they have provided evidence, taken at first sight and without further investigation, that establishes a prima facie case of this character. In keeping with the nature of this inquiry as I have just described it, I will take the Cassimatises' affidavits at their highest and ignore the evidence contained in Mr Copley's affidavit.
145 As noted above, the prima facie case that the Cassimatises have sought to make out in their affidavits is directed to the foreseeability issue. From the content of their affidavits, it would appear the Cassimatises claim that this prima facie case is established by a combination of: their personal views as to their conduct as directors of Storm, viz that they acted lawfully and in Storm's best interests throughout; the absence of any view being expressed by any of the numerous individuals and organisations, including any officer of ASIC itself, who had access to the details of Storm's practices and procedures over more than 20 years of its business activities, to the effect that they may be exposing Storm to the kind, or degree, of risk alleged by the manner in which they caused Storm to give financial advice to any of its clients; and the "true facts" as stated in their defence, particularly Part I of the "Further Matters of Defence" section.
146 On the first part of this combination of factors, the Cassimatises make a number of broad assertions in their affidavits to the general effect that they did nothing to cause Storm to contravene any of the provisions of the Corporations Act and that, during the whole of the period of their directorships of Storm, they acted lawfully and in its best interests. These assertions are set out in full above and they therefore do not require repeating here: for Mr Cassimatis, see at [113] and [125] above and for Mrs Cassimatis, see at [129] and [131] above. In my view, these self-serving, very general assertions do nothing to address the particular factual circumstances that ASIC alleges gave rise to the foreseeability of the kind of risk concerned as described above, nor do they address the circumstances relevant to the foreseeability of the degree of that kind of risk, if it existed. They are, therefore, in my view, far too broad and non-specific to provide any support for the prima facie case the Cassimatises have sought to make out.
147 The second part of this combination of factors appears to be the main one relied upon by the Cassimatises to establish their prima facie case, viz that over the years no one said anything to alert them to the existence of the risk supposedly posed to Storm. On this point, it is important to briefly reiterate and summarise what is said above (at [139]-[142]) about the risk that is pleaded in the FASC. It is that the risk posed to Storm of adverse legal outcomes arose from it contravening various provisions of the Corporations Act, or breaching the terms of various contracts, or through its negligence by the manner in which Storm provided financial advice, on 200 or more specified occasions, to the 46 Part E and Part F investors, ie by using the processes constituting the Storm Model. Further, if it existed, the degree of ASIC's pleaded risk is dependent upon, among other things, the Cassimatises' roles as directors of Storm in managing, setting up and structuring Storm so that it used the Storm Model to provide that financial advice on each of those occasions.
148 To respond to these quite specific allegations about risk, the Cassimatises have sought, in their affidavits, to establish a prima facie case that no such risk existed because a large number of people who were associated with Storm, or who dealt with it in various capacities over the years, including ASIC itself, did not alert them to any risk that Storm's practices and procedures may contravene any provisions of the Corporations Act and therefore pose any risk to Storm. In my view, this evidence in the Cassimatises' affidavit does not establish the requisite prima facie case.
149 That is so for a number of reasons. First, none of the reviews, audits or reports that are described in the Cassimatises' affidavits involved any of the 46 Part E or Part F investors identified in the FASC. For example, Mr Cassimatis says that during their reviews and audits, officers of ASIC "often required individual client files to be read in advance of their visit" (see at para 43(b) at [115] above). However, he does not say what individual client files were provided. In this respect, it may well be significant if one of those files had related to one of the Part E or Part F investors. That sort of specific and direct link between the Cassimatises' evidence and the apposite allegations in the FASC about the 46 investors concerned is lacking.
150 Secondly, none of those reviews, audits or reports was directed to, or considered whether, the use of the Storm Model on any of the 200 or more occasions specified in the FASC may have resulted in financial advice being provided in breach of the nominated provisions of the Corporations Act, or of a binding contract, or of an applicable duty of care. To the contrary, on their face, all of the reviews, audits and reports described by Mr Cassimatis appear to have been general reviews of Storm's practices and procedures, or were reviews, audits or reports that were conducted for unrelated regulatory or similar purposes. For example, the review conducted by Mr Hutley and Mr Nelson is said to have been a "review of Storm's compliance with the 'financial services laws'". Mr Cassimatis does not say in his affidavit what particular financial services laws were involved in that review, how that review was conducted, when the review was conducted, or its precise purpose. Moreover, he does not say whether or not he asked either Mr Hutley or Mr Nelson to conduct a review in relation to any of the five sections of the Corporations Act identified by ASIC in its FASC (see above at [109]). On at least these two points the various criticisms set out in ASIC's reply are pertinent and accurate (see at [103] above).
151 Thirdly, there is no evidence in the Cassimatises' affidavits that any of the people who conducted these reviews or audits or prepared these reports were specifically asked to turn their minds to the specific issues raised in ASIC's FASC. Instead, Mr Cassimatis makes broad statements about his belief based upon the construction he puts on the silence of these people, after they conducted their various reviews or audits, or submitted their reports. Thus, if any one of them had been asked directly about these matters, they may well have given an explanation for their silence other than the absence of a concern about an apprehended risk, the most obvious explanation being that "I was not asked to express a view about that matter".
152 Fourthly, Mr Cassimatis says that he believes ASIC "became familiar with all aspects of Storm's business relevant to the advice it was giving clients" (see at para 44(a) at [115] above). The only basis Mr Cassimatis provides for this belief is the unparticularised claims referred to above. Further, this claimed familiarity is directed to Storm's business and its processes and procedures, rather than the Storm Model which is the central focus of the allegations in ASIC's FASC. This is underscored by the fact that in the next paragraph of his affidavit (para 45 - see at [115] above), Mr Cassimatis mentions "what ASIC refers to as the Storm Model". Mr Cassimatis does not therefore provide any direct evidence that any officer of ASIC had any familiarity with the critical features of the Storm Model that is central to the allegations in the FASC. On this aspect, I consider the criticisms in ASIC's reply are valid (see at [103] and [104] above).
153 Fifthly, there is no evidence in the Cassimatises' affidavits directed to any of the various statements of advice or statements of additional advice provided to any of the Part E or Part F investors. For example, there is not any evidence to support the assertion made in the Cassimatises' defence that the statements of advice that were provided were not in a standard format (see [87(b)] above). I therefore do not consider that any of this evidence establishes a prima facie case that addresses the specific allegations about risk pleaded in the FASC.
154 On the third and last part of this combination of factors, the Cassimatises have again used broad and unparticularised assertions. They both claim that Storm advised its clients in accordance with the practices and procedures pleaded in the "Further Matters of Defence" section of their defence: for Mr Cassimatis, see at [123]-[124] above and for Mrs Cassimatis, less specifically, see at [132] above. On this aspect, the distinction highlighted above (at [94]-[101]) between the Storm Model as pleaded in the FASC and the Storm Business Model, or Storm's practices and procedures, takes on a particular importance. This is so because, as with the assertions in para 44 of Mr Cassimatis' affidavit (see at [115] above), it can be seen from the index headings to the "Further Matters of Defence" section of the Cassimatises' defence (see at [85] above) that many of those matters of defence are directed to the latter, rather than the former. The consequence of this is that those matters are misdirected. This is aptly and accurately expressed in various paragraphs of ASIC's reply: see at [104] and [107] above. Moreover, neither of the Cassimatises makes any attempt in their affidavits to explain how any of the facts pleaded in the pertinent parts of those 40 pages of that section of their defence, provide an answer to any of the allegations about risk made in ASIC's FASC. Put differently, they have not engaged in the exercise of employing this evidence to respond directly to any of the specific factual allegations made by ASIC about the manner in which the financial advice was provided to any of the 46 Part E and Part F investors such that it establishes a prima facie case in response to the foreseeability issue as pleaded in ASIC's FASC.
155 By way of example, the Cassimatises plead in their defence that the paragraphs of the FASC that set out the circumstances of the provision of the statement of advice to Mr and Mrs Dodson "proceed upon a misapprehension of the facts and a misunderstanding of the Storm Business Model and the circumstances of Mr and Mrs Dodson": see para 1609(a) at [86] above. Then, in the next paragraph of their defence, the Cassimatises state that they will refer at trial to the "true facts" pleaded in, among other sections, Part I of the defence: see para 1609(b) at [86] above. Part I of the defence is included in the "Further Matters of Defence" section of that document mentioned above. Taken together, these statements clearly suggest that the Cassimatises believe that there are facts in that section of their defence that go to support their claim that ASIC has materially misapprehended the true position about the provision of the advice to Mr and Mrs Dodson and, once the true position is known, ASIC's claim will fail. If this is so, one would have expected them to make some attempt in their affidavits in support of this summary judgment application to identify the particular facts in that section of their defence that provide that explanation and provide evidence to support those facts. The fact they have not done so further underscores the deficiencies in this evidence.
156 Similar observations can be made about the lack of any evidence in the Cassimatises' affidavits to support some of the other more significant denials pleaded elsewhere in their defence. These include: their pleas about the true nature of the Storm Model's "processes" (see at [89] and [90] above), their denials that either of them managed the business conducted by Storm (see at [91(a) and (b)] above), and their denials that either of them "structured Storm such that its business was that of advising its clients/the public to invest in accordance with the Storm Model" (see at [81] above, the denial of which is recorded at [92] above).
157 Finally, I do not consider the prima facie case that the Cassimatises seek to advance is any more discernible if the entire contents of their affidavits and all of the factors mentioned above are considered together. Even on that approach, the statements in the Cassimatises' affidavits remain broad and unparticularised, or to the extent that they provide specific details of particular matters, those matters are not germane to the quite specific allegations in ASIC's FASC. Some of the statements in the Cassimatises' affidavits even fall into both categories. That is, they are both broad and unparticularised and also irrelevant. Examples of this occur in relation to Professor Valentine's business reference, the complimentary email from the Financial Planning Association and the due diligence investigations conducted in providing Storm with its professional indemnity insurance cover (see at [119]-[120] above). Furthermore, at this broader level, the defective reasoning process employed by the Cassimatises to attempt to make out their prima facie case becomes even more apparent. That is, that because a range of people, including officers of ASIC, who have had different kinds of involvement with Storm's business operations over the years, did not express any concerns about what they learned about those business operations, it necessarily follows that those people held positive views that the Cassimatises and Storm were complying with the Corporations Act in every respect. Furthermore, it also becomes apparent that the prima facie case the Cassimatises seek to make out is based on a non sequitur. That is, that the use of the Storm Business Model, or the Storm processes and procedures, or similar, to provide financial advice to other clients of Storm, on other occasions, in other circumstances, without that involving any detected contraventions of the law, necessarily establishes a prima facie case that the use of the Storm Model with its pleaded processes to provide financial advice to particular clients of Storm, on particular occasions, in particular circumstances, did not involve the particular adverse legal outcomes alleged by ASIC in its FASC.
158 I do not therefore consider that the Cassimatises' affidavits establish a prima facie case on the foreseeability issue pleaded in ASIC's FASC. Specifically, they do not establish a prima facie case that the pleaded risk was not foreseeable. Nor do they establish a prima facie case that, if that risk was foreseeable, the degree of it was, in all the circumstances, so low that a reasonable person in the Cassimatises' position as directors of Storm would not have foreseen that it posed a risk to Storm. As with the Matthews in Fortron (see at [56] above), the Cassimatises have therefore not descended to particulars, nor addressed any of the pertinent factual matters on this issue as pleaded in ASIC's FASC. For these reasons, I consider the Cassimatises have failed on their second and third grounds in this application for summary dismissal.
159 Before leaving this aspect of this application, I should make it clear that none of these conclusions should be taken as indicating that the Cassimatises may not ultimately be successful at the trial of these proceedings in using some, or all, of the facts pleaded in the "Further Matters of Defence" section of their defence, to defeat ASIC's claims. Nor that their claims that, over the years, no one expressed the view to them that Storm could be contravening the Corporations Act in the manner in which it provided its advice to its clients, is not a relevant circumstance that may be taken into account in determining whether or not they have contravened s 180(1) of the Corporations Act. Whether or not they do succeed on either or both of these matters will depend entirely on how, or if, they are advanced at trial.