Australian Securities and Investments Commission v Murphy

KENNETT J: 1 On 29 July 2024 I granted leave to the plaintiff (ASIC) to discontinue this proceeding as against the first and second defendants. I also ordered that interlocutory injunctions and asset preservation orders, which had been made in October 2020, be lifted. The first defendant (Mr Murphy) asked that I give reasons for my decision. My reasons are as follows. 2 The proceeding was commenced by an originating process filed on 6 October 2020. Declarations, injunctions, pecuniary penalties and consumer redress orders were sought against four individuals and a company. Contraventions were alleged of provisions in the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) which prohibit the carrying on or promotion of a financial services business without an Australian financial services licence, misleading or deceptive conduct, false or misleading representations, unconscionable conduct and accepting payment without being able to supply. The allegations were that the defendants were promoting and carrying on businesses in which they obtained payment from debtors in exchange for a service which, they purported, would wipe out their debts (but which actually did nothing). 3 Asset preservation orders and orders requiring the disclosure of certain financial information were made ex parte by Farrell J on 6 October 2020. Orders restraining the carrying on of the businesses were made on 9 October 2020 after a hearing at which the first defendant appeared, during which her Honour observed that she accepted that a prima facie case for the injunctive relief sought by ASIC had been made out. 4 On 27 April 2021 Jagot J made final orders against the third to fifth defendants by consent. 5 The proceeding was stayed as against the remaining defendants on 15 June 2021 by Farrell J, on the ground that a brief had been referred by ASIC to the Commonwealth Director of Public Prosecutions against Mr Murphy in relation to some of the alleged conduct to which this proceeding relates. Mr Murphy was charged with certain criminal offences in March 2022 and a further stay of the present proceeding was ordered on 11 May 2022. 6 The criminal proceeding came to an end on 12 December 2023 when a Judge of the District Court of New South Wales found, pursuant to s 20BA of the Crimes Act 1914 (Cth) (the Crimes Act), that Mr Murphy was unfit to stand trial and unlikely to become fit within 12 months. The Court found under s 20B(3) of the Crimes Act that there was a prima facie case against Mr Murphy, and decided to release him under s 20BC(6) of that Act subject to certain conditions (including that he not provide financial advice or services of any kind and that he accept psychiatric treatment and medication). 7 On 7 May 2024, ASIC wrote to Mr Murphy and the second defendant (Mr Mavroulis) noting that it intended to seek leave to discontinue the proceeding on the basis that existing orders would be dissolved and each party would bear their own costs. Mr Mavroulis responded on the same day indicating that he consented to the orders proposed by ASIC. Mr Murphy replied on 21 May 2024 to the effect that he did not consent. 8 ASIC lodged its interlocutory application, seeking leave to discontinue the proceeding on the basis it had proposed to the defendants, on 11 July 2024. 9 Rule 26.12 of the Federal Court Rules 2011 (Cth) permits a party claiming relief to discontinue its proceeding by filing a notice of discontinuance. The notice may be filed without leave before the return date fixed in the originating application (or before the close of pleadings) (r 26.12(2)(a)); at any time before judgment with the consent of the opposing party (r 26.12(2)(b)) or at any time with the leave of the Court (r 26.12(2)(c)). So far as Mr Mavroulis is concerned, ASIC is entitled to discontinue under r 26.12(2)(b). In relation to Mr Murphy, leave is required under r 26.12(2)(c). The default position is that the discontinuing party is to pay the costs of each other party, but the terms of consent or an order of the Court can provide otherwise (r 26.12(7)). 10 A predecessor of r 26.12 was described in Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd [2010] FCAFC 16; 265 ALR 112 at [116] (Jacobson, Siopis and Foster JJ) as reflecting a general policy of the law that a party should always be permitted to discontinue its proceedings but should usually have to pay the costs of other parties occasioned by the bringing of the proceeding and its abandonment. At [118] the Court referred to Mineralogy Pty Ltd v National Native Title Tribunal (unreported, Lee, Tamberlin and Nicholson JJ, 23 December 1998), where the Full Court accepted that the proper approach to costs, in relation to an application for leave to discontinue, was usually to refrain from making predictions as to what the outcome of the case would have been if it had proceeded to a final hearing. 11 Mr Murphy did not resist the orders sought by ASIC on the ground that ASIC should only be allowed to discontinue on the basis that it would pay his costs. In any event, the position proposed by ASIC as to costs is appropriate. ASIC has not lost heart because it has realised its case is weak. Rather, it has evidently come to the view that further pursuit of the case is not appropriate in view of the findings that have been made about Mr Murphy's mental state. As noted above, ASIC persuaded Farrell J at an early stage of this proceeding that there was a prima facie case for the relief it sought. The District Court was also prepared to find that there was a prima facie case against Mr Murphy on the criminal charges against him arising out of the same alleged conduct. It was clearly reasonable for ASIC to commence the proceeding and pursue it as far as it did. 12 As noted above, in correspondence with ASIC Mr Murphy said that he did not consent to the proposed orders. At one stage during his oral submissions Mr Murphy appeared to have come around to a position of consent, but he reverted to raising objections. I proceeded on the basis that he did not consent to the proposed orders. 13 Mr Murphy raised a number of matters and sought to tender several documents. None of these points, in so far as I could follow them, related in any direct way to the present proceeding. Mr Murphy appeared to have a number of grievances about having been made bankrupt, but this occurred in 1997 and the bankruptcy was annulled in 1999. Mr Murphy also referred to a mobile telephone which he said had been taken from him by ASIC and from which he thought ASIC might be extracting information. However, he provided no evidence that this had occurred. The documents that he handed up in this connection consisted of an invoice and receipts from a mobile telephone business dating from July 2023 (at which time ASIC had filed its evidence in this proceeding and the stay was in effect). Counsel for ASIC obtained instructions that his client did not have possession of a mobile telephone belonging to Mr Murphy and I accept this. Mr Murphy also handed up what appears to be an application made under the Freedom of Information Act 1982 (Cth) and an email from "The GoodSAM Team" that purported to record a "NSW Police Force Event Number". (I did not formally receive Mr Murphy's documents into evidence, or ask senior counsel whether he objected to them, as their relevance to the issues before the Court was never explained.) 14 None of the matters raised by Mr Murphy suggests any reason why ASIC should not be allowed to discontinue its case against him. Discontinuance, together with a lifting of the interlocutory orders that are still in force against Mr Murphy, is self-evidently advantageous to him. 15 For these reasons I made the orders sought by ASIC. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kennett.