Australian Securities and Investments Commission v Guo

Introduction 1 This is an application by the plaintiff (ASIC) for an extension of a travel restraint order against the defendant, Mr Liang Guo. The application is made by interlocutory process dated 13 August 2024. The application is brought under s 1323 of the Corporations Act 2001 (Cth). 2 A travel restraint order has been in place since 20 February 2024. The initial period of the restraint was a period of six months, ending on 20 August 2024. By consent, the period was extended to 2 September 2024, to enable the parties to put on evidence and submissions in relation to ASIC's present interlocutory process. ASIC seeks an extension of the period of the travel restraint until 20 February 2025, that is, an extension of six months from the date when the initial period was due to end. 3 In support of its application, ASIC relies on an affidavit of Anita Das dated 19 February 2024 and an affidavit of David Neal dated 13 August 2024. 4 In opposition to the application, Mr Guo relies on three affidavits of himself, dated 8 March 2024, 22 August 2024 and 28 August 2024. 5 In advance of the hearing, each party filed an outline of submissions.

Procedural background 6 The proceeding was commenced by ASIC filing an originating process dated 19 February 2024. 7 On 20 February 2024, an ex parte application was made by ASIC for a travel restraint order. This was heard by Button J as Commercial and Corporations Duty Judge. Her Honour made a travel restraint order (and associated orders) that day and published reasons for making those orders on 23 February 2024: Australian Securities and Investments Commission v Guo [2024] FCA 125. The orders made by Button J provided for the travel restraint to end on 20 August 2024. 8 On 12 March 2024, the matter came before O'Callaghan J as Commercial and Corporations Duty Judge for a contested hearing as to whether the travel restraint order should remain in place. His Honour reserved judgment. On 18 March 2024, his Honour gave judgment: Australian Securities and Investments Commission v Guo (No 2) [2024] FCA 251 (March Reasons). 9 As indicated in the March Reasons at [8], his Honour approached the matter on the basis that he would determine the question of the appropriateness of the travel restraint order afresh, in light of the material and submissions put forward by Mr Guo at the hearing. For the reasons set out in the March Reasons, his Honour decided that it was appropriate that the travel restraint order remain in place for the period to 20 August 2024. Accordingly, his Honour made an order that Mr Guo's application to discharge the travel restraint order be dismissed. 10 On 14 August 2024, O'Bryan J (as Commercial and Corporations Duty Judge) made orders by consent that the travel restraint order be extended to 2 September 2024 and that ASIC's interlocutory process dated 13 August 2024 be returnable before the Commercial and Corporations Duty Judge in the week commencing 26 August 2024. In this way, the matter came before me for hearing.

Background facts 11 The background facts, as they stood in March 2024, are set out in the March Reasons at [9]-[23]. 12 The affidavit of Mr Neal sets out the progress of ASIC's investigation since March 2024, including that ASIC has now examined Mr Guo on two occasions. In this regard, Mr Neal's affidavit states: 10. At the time of the First Application, ASIC was in the very early stages of its investigation and had only taken some initial investigative steps, including meeting with the Liquidators and issuing a compulsory notice on them for books and records of Blockchain Global. 11. Since the First Application, ASIC has completed the following investigative steps: (a) triaged over 1 terabyte of records obtained from the Liquidator and subsequently reviewed around 30,000 documents relevant to the investigation; (b) obtained the records of over 20 bank accounts associated with Blockchain Global, the ACX Exchange and Mr Guo and conducted financial tracing exercises over those bank accounts; (c) on 30 May 2024, executed search warrants across two premises associated with Mr Guo, at which ASIC obtained a significant volume of evidential material, including eight Blockchain Global severs, three hard-drives, two desktops, three laptops as well as the personal mobile device of Mr Guo; (d) commenced seeking witness statements from ex-Blockchain Global employees, ACX Exchange customers and the Liquidators; and (e) examined Mr Guo on two occasions on 26 June 2024 and 2 July 2024. 12. Whilst ASIC has actively progressed its investigation, the investigation has only been on foot for just over six months and remains at a relatively early stage for a complex investigation. 13. To fully investigate ASIC's concerns regarding Mr Guo's conduct, ASIC will need to complete the following further investigative steps: (a) access and analyse the evidence contained on the servers, hard-drives, desktops, laptops and mobile phones seized during the search warrant, which contain millions of files over which ASIC will need to run keyword searches to narrow down the material it needs to review; (b) conduct further examinations or interviews, including of Mr Guo in relation to further evidence that is identified from the materials seized during the search warrant; (c) complete seeking voluntary witness statements from ex-Blockchain Global employees and ACX Exchange customers; (d) complete the financial tracing exercises; (e) issue any further compulsory notices for documents or reasonable assistance that may be required. 14. I believe that ASIC requires a further six months to complete the above investigative steps, in particular, any further interview or examination of Mr Guo based on additional evidence identified in the search warrant materials. 13 Mr Neal's affidavit also sets out material that ASIC relies on to contend that Mr Guo is a flight risk at paragraphs 15 to 22. Mr Neal's affidavit sets out correspondence with Mr Guo's solicitors in which they indicate that Mr Guo wants to travel to China as soon as possible for two reasons. The first relates to having his name put on the birth certificate for his daughter, who was born in China in May 2024. The second relates to visiting Mr Guo's father, who resides in China and is in poor health. 14 Mr Neal also states (at paragraphs 23 to 25 of his affidavit) that ASIC has identified aggrieved persons (for the purposes of s 1323) as outlined in Ms Das's affidavit. Mr Neal states that if Mr Guo were to leave Australia either permanently or for an extended period, it is likely to be difficult (or impossible) to examine or interview him further or obtain more information from him, and this would hamper ASIC's investigation and therefore be to the detriment of aggrieved persons. 15 Mr Guo's affidavits set out material about the two reasons why he wants to travel to China, as referred to above. 16 As indicated above, the first matter concerns having his name placed on his daughter's birth certificate. The circumstances leading to his daughter's birth are personal and unnecessary to set out in these reasons. It is sufficient to state that Mr Guo and his ex-wife (the mother of the baby) want to obtain a visa for the baby to come to Australia; Mr Guo wishes to have his name added to the birth certificate to assist that process; and this can only be achieved by Mr Guo visiting China in person (including to have a DNA test there). The evidence includes email correspondence with the Department of Home Affairs about the process and requirements to obtain a visa for the baby. 17 The second matter is that Mr Guo wants to visit his father in China. The evidence includes material that shows that Mr Guo's father is in poor health. It is unnecessary to set out the details of the father's health conditions, which are serious.

Applicable principles 18 There is no dispute between the parties as to the applicable principles. 19 ASIC's application is brought under s 1323(1)(j) and (k) of the Corporations Act. ASIC accepts that the onus is on it to establish afresh that the requirements of s 1323 are satisfied, as it is seeking (in substance) a further travel restraint. 20 The principles were conveniently summarised by O'Callaghan J in the March Reasons at [25]-[32]. For ease of reference, I set out those paragraphs: 25 Section 1323 gives the court power to make a variety of specified orders in the case where an investigation is being carried out under the ASIC Act or the Corporations Act or where a prosecution or civil proceeding has been begun against a person under the Corporations Act. 26 An application under the section may be brought by ASIC or by "an aggrieved person", being a person to whom the person under investigation (or the subject of a prosecution or civil proceeding) is liable or may become liable in debt or by way of damages or compensation or to account for property. 27 An order under the section may be made only where "the Court considers it necessary or desirable for the purpose of protecting the interests of [the aggrieved] person." 28 Section 1323(1) relevantly provides that: (1) Where: (a) an investigation is being carried out under the ASIC Act or this Act in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Act; … and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an aggrieved person) to whom the person referred to in paragraph (a), (b) or (c), as the case may be, (in this section called the relevant person), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for financial products or other property, the Court may, on application by ASIC or by an aggrieved person, make one or more of the following orders: … (j) if the relevant person is a natural person - an order requiring that person to deliver up to the Court his or her passport and such other documents as the Court thinks fit; (k) if the relevant person is a natural person - an order prohibiting that person from leaving this jurisdiction, or Australia, without the consent of the Court. 29 As French J (as he then was) explained in Re Richstar Enterprises Pty Ltd (ACN 099 071 968); Australian Securities and Investments Commission v Carey (No 3) (2006) 232 ALR 577; [2006] FCA 433 at [23]-[27]: The liabilities, actual or potential, to which the section refers, may arise from a contravention of the Corporations Act or under the general law. The court may have regard to known facts and circumstances in assessing their existence and potential existence - Corporate Affairs Commission (SA) v Lone Star Exploration NL (1988) SASR 24 at 31; 14 ACLR 499 at 505. Von Doussa J said in that case: … the Court may have regard to all the known facts and circumstances, although in a particular case the Court may think it appropriate to consider whether the actual or potential liability is connected in some way with a particular contravention of the [Corporations Act]. There is a variety of ways in which the interests of persons, to whom liabilities may be owed, can be protected by orders made under the section. The nature of the protection can vary according to the nature of the risks assessed. As Palmer J said in Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd (2002) 20 ACLC 1530; [2002] NSWSC 684 at [37]: … there may be evidence to suggest that fraud has been perpetrated on a large scale and that many of the victims have no or little information about the extent of the fraud, no or little means for their own investigations, and no or little resources to prosecute their own claims. In such a case, the interests of such persons are protected, within the contemplation of s 1323, by enabling ASIC to conduct an investigation for the purpose of identifying the wrongdoers and exposing them not only to penalties under the Corporations Act and other legislation, but also to claims for compensation from the victims themselves. The orders that can be made under the section are directed, inter alia, to the preservation of assets against which recovery may be sought in the event that liability to an 'aggrieved person' is established on the part of a 'relevant person'. The orders are made in circumstances where 'an investigation is being carried out', 'a prosecution has been begun' or 'a civil proceeding has been begun'. That is to say the orders can be made before liability is established and indeed before the evidence necessary to establish liability has been collected. While an application under the section is not interlocutory in an existing criminal or civil proceeding, it is interlocutory in a wider sense. It preserves the status quo and the assets of the relevant person pending the outcome of the investigation, prosecution or civil proceedings which are on foot - Corporate Affairs Commission v Lone Star Exploration NL (No 2) at SASR 30; ACLR 504. At the stage an order is sought the court may not be in a position to identify with precision any particular liability owed by the person the subject of the proposed order. This consideration applies to final orders made under the section as well as to interim orders for which it expressly provides in s 1323(3). The final orders made under the section are necessarily of a temporary or holding character rather than finally disposing of the rights and liabilities of the relevant persons affected by them. The circumstances in which the court may make orders under s 1323(1) are wide as indicated by the words 'necessary or desirable … for the purpose of protecting the interests of a person …'. There is an element of risk assessment and risk management in the judgment the court is called on to make. It follows, and has been accepted, that there is no requirement on the part of ASIC to demonstrate a prima facie case of liability on the part of the relevant person or that the person's assets have been or are about to be dissipated - Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 7 ACLC 467 at 476 (Powell J); Australian Securities and Investment Commission v Adler (2001) 38 ACSR 266; [2001] NSWSC 451 at [7] (Santow J). The nature and duration of orders made under s 1323(1) can be fashioned by the court to reflect its assessment of any risk of dissipation of the assets of a person under investigation. But their legitimate purposes can go further. The interests of aggrieved persons may be protected not only by orders designed to protect dissipation of assets, but also by orders which create an opportunity for the assets of the person under investigation to be ascertained. 30 It must also be borne in mind that it is a serious matter to restrain a person from travelling internationally. See Australian Securities and Investments Commission v Wiggins (1998) 90 FCR 314 at 320 (Finkelstein J); Australian Securities and Investments Commission; Re Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey (No 19) (2008) 65 ACSR 421; [2008] FCA 38 at [32] (French J) ("The imposition of restrictions upon a person's freedom of movement is a serious step not lightly to be undertaken. Such authority as there is on the imposition of such restrictions under s 1323 of the Act mandates caution in imposing them…" (citations omitted)) 31 On the other hand, the private right to travel may be outweighed by the public interest in ASIC being able to pursue its investigations, and for the purpose of protecting the interests of the aggrieved persons. See Australian Securities and Investments Commission v Johnston [2009] FCA 1276 at [8] (Siopis J). 32 As Gordon J said in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 4) [2013] FCA 318 at [32]: … the relevant test for the making of an order under sub-ss 1323(1)(j) and (k) is whether such an order is "necessary or desirable": s 1323(1) of the Act. In deciding whether to grant or extend an order, the Court is required to perform a balancing exercise, weighing the benefit and detriment to the particular defendant against those of the aggrieved persons … Factors relevant to the balancing exercise include: 1. the importance of protecting investors' interests … 2. the length of time that the respondent has been subject to the order … 3. the risk that the respondent might leave the jurisdiction and not return … 4. the respondent's legitimate interests in being allowed to travel … 5. the length of time for which the matter has been ongoing … (Internal quotations and citations omitted).

Consideration 21 As noted above, ASIC seeks a six-month extension of the travel restraint order (from the date it was originally due to expire). In summary, the purpose of the extension is to enable ASIC to progress its investigation, which may involve further examination of Mr Guo once ASIC has reviewed the documents it has obtained through executing search warrants. ASIC submits that Mr Guo is a flight risk having regard to the seriousness of the alleged contraventions, which could result in criminal proceedings against him, punishable by a term of imprisonment. ASIC accepts that the purpose of an order under s 1323 is not to keep Mr Guo in the country to enable him to be charged with criminal offences. ASIC submits that the flight risk is nevertheless relevant as it may result in Mr Guo not being available to be examined as part of ASIC's investigation, and this would be to the detriment of aggrieved persons. 22 Mr Guo opposes the extension of the travel restraint order, noting that a travel restraint has already been in place for over six months, and the two reasons outlined above as to why he wants to visit China. Mr Guo notes his ties to Australia: he has lived here since 2002 and been a permanent resident of Australia since 2008; he has a child aged eight who resides in Australia. Mr Guo submits that, before the travel restraint was in place, he travelled outside of Australia several times and returned, notwithstanding the existence of legal proceedings against him. Accordingly, Mr Guo submits he is not a flight risk. 23 During the course of the hearing, I raised with both parties whether the material before the Court might justify a one-month extension of the travel restraint, and the parties made submissions on this. ASIC submitted that this would not be adequate time for it to complete its review of documents and conduct any further examination of Mr Guo. Mr Guo opposed the extension, for the reasons already indicated. 24 There is no issue that the first jurisdictional limb of s 1323(1) is satisfied as ASIC is carrying out an investigation under the Australian Securities and Investments Commission Act 2001 (Cth) in relation to acts or omissions by Mr Guo that may constitute a contravention of the Corporations Act. 25 The difficulty I have with ASIC's application is that the affidavit material does not explain why it is necessary to extend the travel restraint for a further six months for the purposes of ASIC's investigation. The search warrant materials were obtained three months ago (see paragraph 11(c) of Mr Neal's affidavit). The evidence contains no real detail as to the steps that have been taken to review that material and how far advanced the review is. There is no evidence as to whether the two examinations of Mr Guo that have already been conducted were fruitful, and as to how Mr Guo may be able to assist further. The evidence does not include any timeline for the review of the search warrant material or for further examinations of Mr Guo. 26 In light of these matters, I am not satisfied that it is "necessary or desirable" for the purpose of protecting the interests of aggrieved persons to extend the travel restraint order for a period of six months. 27 However, having regard to the material relied on by ASIC as well as taking into account the material relied on by Mr Guo, I am satisfied that it is "necessary or desirable" for the purposes of protecting the interests of aggrieved persons to extend the travel restraint order for a period of one month from the original date it was due to expire, that is, to extend the order to 20 September 2024. In reaching this view, I have had regard to the seriousness of the matters that are being investigated by ASIC (as detailed in the March Reasons) and the potential need of ASIC to conduct further examinations of Mr Guo in connection with material that it has reviewed since the examination of Mr Guo on 2 July 2024 (or that ASIC may review in the coming weeks). I have had regard to the period of time that the travel restraint has already been in place. I have also had regard to the nature of ASIC's investigation and the potential utility of further examination of Mr Guo. 28 Insofar as Mr Guo relies on the two matters described above, I accept that Mr Guo's father is in poor health and Mr Guo wants to visit him as soon as possible. This provides a strong reason not to extend the travel restraint order. I have balanced this (as well as the extent of the intrusion into Mr Guo's personal liberties) against the seriousness of the matters raised in the investigation and the potential utility of a further examination of Mr Guo. Should Mr Guo's father's health deteriorate, and Mr Guo wishes to travel to China sooner than 20 September 2024, it is open to Mr Guo to approach the Court on an urgent basis to seek to have the travel restraint lifted. 29 Insofar as Mr Guo seeks to visit China to have his name placed on his daughter's birth certificate, the evidence in relation to this matter is a little unclear and raises a number of questions. I place less weight on this matter for present purposes. 30 I accept that on the material there is reason for concern that Mr Guo may be a flight risk and have taken this into account. 31 For these reasons, I consider it appropriate to extend the travel restraint order for a period of one month from the date it was originally due to expire, that is, to extend the order to 20 September 2024. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.