Australian Securities and Investments Commission v Goldenberg

BACKGROUND 2 Amongst other things, the orders made in November 2017 relevantly provided for the following: (a) restraints upon the defendants from providing, dealing in, or promoting financial services or products pursuant to s 1101B(5) and s 1324(4) of the Corporations Act 2001 (Cth); (b) restraints upon the defendants from transferring, taking or sending any funds held on behalf of any client or investor without the informed and express written consent of that client or investor pursuant to s 1324(4) of the Act; (c) various orders prohibiting the defendants from advertising or promoting any financial services or products pursuant to s 1324(4) of the Act; and (d) freezing orders pursuant to s 1323(1) and s 1323(3) of the Act; 3 Sections 1101B(5), 1323 and 1324(4) of the Act confer a wide power on the Court to grant interim injunctions and freezing orders on an application from ASIC in circumstances where it is desirable to do so. In this case, the orders were made to preserve the status quo and secure the defendants' assets while ASIC's investigations into suspected contraventions of the Act proceeded. In the first affidavit of Mr Bertram, a senior manager employed by ASIC, sworn on 8 November 2017, those suspected contraventions were said to be in relation to: (a) section 727 (offering securities without a current disclosure document), s 911A (requirement to hold an Australian Financial Services License), s 920C (effect of contravening a banning order), s 1041E (false and misleading statements), s 1041G (dishonest conduct) and s 1041H (misleading or deceptive conduct) of the Act; (b) section 12DA (misleading or deceptive conduct) and s 12DB (false or misleading statements) of the Australian Securities and Investments Commission Act 2001 (Cth); and (c) section 378 of the Criminal Code Act Compilation Act 1913 (WA). 4 The relevant conduct that is alleged to give rise to these contraventions relates to the operation of a managed investment scheme which involved prospective home buyers investing their self-managed super funds in the scheme and then receiving loans from the scheme's pooled funds for the purpose of securing a deposit on a home. 5 More than two and half years have passed since the initial orders were made. They have been varied a number of times, mostly by consent. On 3 April 2018, ASIC discontinued the proceedings against Superfunded.

ASIC'S CONTACT WITH AGGRIEVED PERSONS 6 Throughout the course of its investigations, ASIC has kept the Court updated on its contact with potential Aggrieved Persons so as to identify any third parties who may wish to commence legal proceedings against the defendants for the recovery of funds. In addition to its own investigations into the suspected contraventions listed above, it is on the basis of preserving the defendants' assets to satisfy any potential third party claim that ASIC has sought the continued operation of the freezing orders. 7 On 17 January 2020, ASIC informed the Court that it had recently contacted each person identified as a potential Aggrieved Person and had received three responses. Those responses were from both represented and unrepresented investors who were all in the preliminary stages of taking advice and considering whether to commence proceedings against the defendants. On 28 February 2020, a further update was provided to the Court which indicated that of the three parties previously considering legal action, two had fallen away. The Court received a final update from ASIC on 19 May 2020 advising that, although one investor continued to maintain an intention to commence proceedings against the defendants, ASIC 'has been unable to solicit further information in relation to whether legal advice has been obtained and/or when the proceedings is likely to be commenced'. 8 Following receipt of this final update, the matter was listed for a case management hearing on 4 June 2020. The parties were advised of the listing on 20 May 2020. 9 On 28 May 2020, Mr Bertram filed his fifth affidavit in which he deposed to the actions that ASIC had taken to give notice of the case management hearing to the potential Aggrieved Persons. This notice took the form of an email sent to the Aggrieved Persons on 21 May 2020 (Email Notice) and a message uploaded to ASIC's public webpage on 26 May 2020 (Webpage Notice). 10 The Email Notice included the following statement: The Federal Court in Perth has now listed this matter for a Case Management Hearing on 4 June 2020 at 10.15am at which time the Court is likely to discharge the injunctions because ASIC has been unable to locate any assets of substance that would satisfy any claim. ASIC has made banning orders against both Mark and Max Goldenberg and no aggrieved person has made a claim. If you wish to make submissions to the contrary you may wish to attend the Case Management Hearing or advise ASIC of your objection. (Emphasis in original, underline added). 11 The Webpage Notice included the following statement: The Federal Court in Perth has listed this matter for a case management hearing on 4 June 2020 at 10.15am, at which time the Court may discharge the freezing orders over the assets of Mark Goldenberg and Max Goldenberg. If you want the freezing orders to remain in place because you believe you may have a claim, then please attend the Case Management Hearing, which will be held via video or telephone conferencing. Please contact the Federal Court Registry on (08) 9268 7100 closer to the date for further details. (Emphasis in original). 12 As at 28 May 2020, ASIC had not received any responses to the Email Notice or the Webpage Notice. On this basis, ASIC informed the Court that it would seek orders discharging the freezing orders and injunctions, and orders discontinuing its proceedings against the defendants provided that no Aggrieved Persons attended the case management hearing to object to that course. 13 The case management hearing on 4 June 2020 was conducted via telephone. Despite the details provided in the Webpage Notice, the Court did not receive any enquiries or requests to attend the hearing and no person physically attended the courtroom from which the telephone conference was broadcast. Mr Max Goldenberg was represented at the hearing though he did not oppose the orders sought by ASIC. Mr Mark Goldenberg did not appear.

CONSIDERATION 14 In circumstances where the freezing orders and injunctions were made on an interim basis in November 2017, it is entirely appropriate for ASIC to now seek their discharge. As revealed in the Email Notice, ASIC's investigations have failed to identify any substantive assets to satisfy potential claims. In addition, the Aggrieved Persons have had more than two and a half years within which to consider their position with respect to pursuing their own proceedings against the defendants. None has done so. 15 As the Email Notice indicates, ASIC has already imposed bans on Messrs Mark and Max Goldenberg in relation to the provision of financial services and engaging in credit activities. The bans on Mr Mark Goldenberg are permanent, with the most recent being made in March 2020. 16 Although ASIC maintains that its investigations remain on foot, having regard to the bans already in place, it is clear that the prevailing reason for the continuation of the freezing orders was to secure the defendants' assets in the event that an Aggrieved Person commenced proceedings.

CONCLUSION 17 In circumstances where ASIC's investigation has identified no assets of substance which could satisfy a potential claim, and where Aggrieved Persons have been given notice of ASIC's intention to discharge the interim orders after some two and a half years, I am satisfied that the orders sought by ASIC should be made. Orders were made in terms of ASIC's minute that was provided to the Court on 29 May 2020. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.