Australian Securities and Investments Commission v Dawson

ANASTASSIOU J 1 By originating process dated 6 August 2020 the Plaintiff, the Australian Securities and Investments Commission (ASIC), seeks certain ex parte orders against the First and Second Defendants, being Mr Larry John Dawson and a company he is the sole director and shareholder of, PW Kitt Co Pty Ltd. In summary, the originating process seeks orders appointing Receivers over the property of Mr Dawson and PW Kitt Co who shall report to the Court within 42 days of the appointment on the financial positions of the Defendants, injunctions restraining dealings with that property, and an order restraining Mr Dawson from leaving Australia, as well as other ancillary orders. 2 For the reasons that follow, relief substantially in the form sought by ASIC is granted.

Alleged conduct 3 The application is supported by affidavits of Ms White and Ms Guanlao of the same date. Ms White and Ms Guanlao are both 'authorised delegates of ASIC' pursuant to s 102 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), have been delegated certain functions and powers, including the functions and powers under Part 3 of the ASIC Act which relate to ASIC's investigation and information gathering powers. The White affidavit at [11] and [12] summarises the bases for the application as follows: 11. … ASIC is concerned that the Defendants have obtained funds from Australian investors (who appear to be unsophisticated investors) by using the same or substantially similar company and business names to a legitimate business and an Australian financial services (AFS) licence number of another company, and by holding themselves out as being licensed or authorised to deal in financial products, when in fact the Defendants (a) have no connection with these legitimate companies/businesses and (b) hold no licence or authority to deal in financial products or services. 12. ASIC believes that almost $7 million has been raised by the Defendants from Australian investors and that, of those funds, more than $2 million has been transferred overseas and more than $3 million has been used to purchase cryptocurrencies. ASIC believes that the Defendants have raised funds by cold-calling Australian consumers and through websites which are still operative. ASIC is concerned that if the relief sought in the Originating Process is not granted, the Defendants may continue to raise funds based on misleading representations and may continue to transfer overseas or otherwise misappropriate investor funds. 4 On 1 July 2020 ASIC commenced an investigation pursuant to s 13 of the ASIC Act into suspected contraventions by the defendants of ss 911A, 911C, 1041E and 1041H of the Corporations Act 2001 (Cth), ss 12DA and 12DB of the ASIC Act and ss 192E and 192G of the Crimes Act 1900 (NSW) (described herein as the Investigation). In furtherance of the Investigation ASIC has caused searches to be conducted of national databases maintained by the Australian Securities and Investments Commission, issued statutory notices on certain non-parties for production of documents, and communicated with certain investors in the investment scheme allegedly operated by Mr Dawson. 5 As a result of the matters uncovered by the Investigation Ms White deposes that she is "concerned" that Mr Dawson and PW Kitt Co may have engaged in certain fraudulent conduct to induce investors to provide them funds. The fraudulent conduct alleged is that Mr Dawson and PW Kitt Co, through websites and entities they control, have masqueraded in the colours of a legitimate financial services business to dupe the investors. The Defendants are not AFS Licensees or authorised representatives. 6 The legitimate businesses are SMSF Advisory Services Pty Ltd (ACN 097 808 145) (SMSF Advisory) and SMSF Super Advisory Pty Ltd (ACN 167 051 470) (SMSF Super), the holder of AFS licence 450822. Persons associated with those businesses relevant to the alleged conduct of Mr Dawson and PW Kitt Co are one of SMSF Advisory's directors and shareholders Mr Peter William Kitt, and the directors of SMSF Super, Mr Tony Zulli and Mr Neil Schafer. 7 The masquerading is alleged to have occurred by the following means. Mr Dawson and PW Kitt Co are suspected of having operated two websites: "smsfadvisory.com" (SMSF Advisory website) and "pwkittco.com" (PW Kitt website). Screengrabs of the websites taken by Ms White contain representations that services are provided under AFS licence number 450822 (White affidavit at [30]-[31] and [45]). This is the AFS licence held by SMSF Super. Paragraph [34] of the White affidavit deposes that "I do not believe that [Mr] Kitt or SMSF Advisory are in any way associated with the SMSF Advisory website, and I am not aware of any person associated with the SMSF Advisory website who holds a [AFS] licence or authorisation." At [64] she deposes "I believe that Kitt is not involved in the SMSF Advisory website or PW Kitt website or the receipt of investor funds into the PW Kitt Co bank accounts, and he is not connected to Dawson or PW Kitt Co." 8 Further, a Brochure is available for download from the SMSF Advisory website which purports to contain two documents, an 'Investment Menu' and a 'Product Disclosure Statement' (the purported PDS). The purported PDS appears to be materially identical to the product disclosure statement of an unrelated financial services business. 9 In early May 2020 the conduct described above appears to have come to the attention of Mr Zulli. Exhibited to the White affidavit was a series of emails between Mr Zulli and members of ASIC concerning the misuse of the SMSF Super AFS licence number (White affidavit at [53]). Mr Schafer subsequently attended at the office listed on the SMSF Advisory website and attempted to speak with someone to no avail. 10 In early July 2020 Ms White spoke with Mr Kitt. Mr Kitt stated that he is a director of SMSF Advisory, that it does not hold an AFS Licence, and that it does not have a website. Mr Kitt further explained he previously operated a business P W Kitt & Co Pty Ltd, but that it was deregistered (White affidavit at [62]). A company search confirmed this. 11 As noted above, ASIC caused notices to produce be served on certain non-parties. In particular, ASIC obtained records from banks who held accounts in the names of Mr Dawson and PW Kitt Co (Guanlao affidavit at [8]). The Guanlao affidavit deposes to these searches in detail and exhibits the documents returned. ASIC identified certain investors who had made deposits into the accounts controlled by Mr Dawson and PW Kitt Co, and made contact with them (White affidavit at [65]). 12 For the reasons that have been given by ASIC in its written submissions, I am satisfied based on the material I have summarised in brief above, that it is appropriate to make the orders on an interim and ex parte basis. The matter will be listed for a case management hearing on 13 August 2020 at 2:15 pm, at which time the Defendants, if so advised, will be at liberty to apply to set aside or vary the orders. 13 As I have indicated in the course of discussion with counsel for ASIC, I have requested that the Defendants, upon being served with the material, be informed that should they make an urgent application prior to the case management hearing on 13 August 2020 to vary or set aside the orders, they should contact the Court and urgent arrangements will be made to hear and determine it. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou.