Australian Securities and Investments Commission v Oceanic Asset Management Pty Ltd, in the matter of Oceanic Asset Management Pty Ltd

AND: OCEANIC ASSET MANAGEMENT PTY LTD (ACN 110 278 110)

AUSTRALIAN GLOBAL CAPITAL PTY LTD (ACN 130 826 470)

MULATO MANAGEMENT SERVICES PTY LTD (ACN 140 307 526)

JUDGE: BARKER J DATE OF ORDER: 24 AUGUST 2015 WHERE MADE: PERTH

1. Time for service of this originating process and the supporting affidavit be abridged to 4pm on 20 August 2015.
2. This originating process be returnable immediately before Justice Barker at 2:45pm on 24 August 2015.
3. Until further order: (1) Under section 472(2) of the Corporations Act 2001 (Cth) (Corporations Act), Vincent Smith of Ernst & Young, 11 Mounts Bay Road, Perth, WA, be appointed as provisional liquidator of each of the Defendants. (2) Pursuant to section 1323(1)(h) of the Corporations Act, Kim Wallman of HLB Mann Judd (Insolvency WA), Ground Floor, 15 Rheola Street, West Perth, WA, be appointed as trustee (Trustee) to the deceased estate of Mr Jones, without security, of all of the property (as defined in the Corporations Act) of the deceased estate of Mr Jones. (3) The Trustee have the powers set out in sections 420(1), (2)(a), (b), (e), (f), (g), (k), (n), (p), (q), (r), (t) and (u) of the Corporations Act and can exercise those powers in respect of all of the property (as defined in the Corporations Act) of the deceased estate of Mr Jones. (4) Further to the orders sought in paragraphs 3(1), (2) and (3) above, the Public Trustee and the personal representative, executor or administrator of the deceased estates of Mr Jones or Mrs Jones by themselves and their servants, agents and employees be restrained from: (a) moving, or causing or permitting to be removed from Australia all or any of the property (as defined in the Corporations Act) of the Defendants and Mr Jones, including, but not limited to, funds in bank accounts held by the Defendants in their names or Mr Jones' name or the joint name of Mr and Mrs Jones with Westpac Banking Corporation, being: First Defendant Business Max-I Direct 036001 280 934 Business Cheque Plus 036067 249 796 Second Defendant Business Max-I Direct 036001 280 969 Business Cheque Plus 036001 280950 Third Defendant Business Cash Reserve 036001 506462 Business Cheque Account 036067 641165 Fifth Defendant Business One Low 036001 309637 Business Max-I Direct 036001 309645 Sixth Defendant Housing Loan 037125 60032 Classic Plus Account 036001 591847

(the Westpac Accounts); and/or (b) selling, charging, mortgaging or otherwise dealing with, disposing of and/or diminishing the value of all or any of the property (as defined in the Corporations Act) of the Defendants or Mr Jones or Mrs Jones, including, but not limited to, the monies in the Westpac Accounts and real property (in Australia and the United Kingdom) in the deceased estates of Mr Jones or Mrs Jones, the real property being: Jeanette Helena Jones and David Jones 65 McDonald Street, Como, WA Lot 38 Diagram 88190

David Jones 1 Chevin Court New Zealand Lane Duffield Belper DY173072

(the Property) (c) causing or permitting to be sold, charged, mortgaged or otherwise dealt with, disposed of, or diminished in value, all or any of their property of the Defendants or Mr or Mrs Jones (as defined in the Corporations Act) including, but not limited to, the monies in the Westpac Accounts and the Property; (d) without limiting the terms of subparagraphs (a) to (c) above, incurring new liabilities for the Defendants or Mr or Mrs Jones including, without limitation, liabilities incurred either directly or indirectly, through the use of a credit card, a credit facility, a drawdown facility or a re-draw facility; and (e) without limiting the terms of subparagraphs (a) to (d) above, withdrawing, transferring or otherwise disposing of or dealing with, any monies available to the Defendants or Mr or Mrs Jones in any account with any bank, building society or other financial institution, (in Australia and the United Kingdom), in which the Defendants or Mr Jones or Mrs Jones have any legal or equitable interest including, but not limited to, the monies standing to the credit of the Westpac Accounts. 4. To the extent necessary, the Plaintiff has leave to give to: (1) the relevant authorities that record, control and regulate the ownership of real property; (2) the relevant authorities that record, control and regulate the ownership of motor vehicles; (3) the relevant authorities that record, control and regulate the ownership of maritime vessels and craft; (4) any bank, building society or other financial institution through which, to the best of the Plaintiff's belief, the Defendants operate any account; and (5) any other person or entity, holding or controlling property, which, to the best of the Plaintiff's belief, belongs to the Defendants, notice of these Orders, by delivering a copy of them to a person apparently in the employ of that entity or person. 5. The costs of today be in the application. 6. There be liberty to any interested person to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 438 of 2015

in the matter of oceanic asset management pty ltd BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

AND: OCEANIC ASSET MANAGEMENT PTY LTD (ACN 110 278 110)

AUSTRALIAN GLOBAL CAPITAL PTY LTD (ACN 130 826 470)

MULATO MANAGEMENT SERVICES PTY LTD (ACN 140 307 526)

JUDGE: BARKER J DATE: 24 AUGUST 2015 PLACE: PERTH

REASONS FOR JUDGMENT 1 The Australian Securities and Investments Commission (ASIC) applies, pursuant to various provisions of the Corporations Act 2001 (Cth) and the Federal Court of Australia Act 1976 (Cth) for the following relief: (1) final relief, being the winding up of each of the defendants; and (2) interim relief, being the appointment of a provisional liquidator to each of the defendants and a trustee in respect of the property of Mr David Jones, deceased, as well as asset preservation orders against the property of the late Mr Jones and his late wife, Mrs Jeanette Jones, deceased. 2 The application for this relief is sought on short notice, each of the defendants having been served with the originating process and supporting documentation on 20 August 2015. 3 The immediate question is whether the interim relief sought should now be granted.

Factual circumstances 4 ASIC's application is supported by the affidavit of Mr Gary Martyn Bertram dated 18 August 2015. Mr Bertram is a senior manager in the Enforcement Western Australia team within the Perth office of ASIC. 5 Pursuant to s 102 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), ASIC has delegated to Mr Bertram certain functions and powers including its functions and powers under Pt 3 of the ASIC Act relating to conduct of investigations. 6 In mid-July 2015, ASIC's Misconduct and Breach Report (M&BR) team received what Mr Bertram described as "complaints" alleging that Mr and Mrs Jones had committed suicide leaving a note confessing that Mr Jones had defrauded investors through Mulato Nominees Pty Ltd, the fifth defendant. 7 On 24 July 2015, Mr Bertram and two other member of the M&BR team met with Mr Chris Jones, a nephew of Mr Jones and employed by Oceanic Asset Management Pty Ltd (OAM), the first defendant, as an investment manager, and Mr David Lees, employed by OAM as a fund manager and a consultant to Mulato. 8 At this initial meeting, Mr Bertram says Chris Jones advised that Mr and Mrs Jones were deceased and that they had died intestate, that is to say, without a will. 9 Mr Bertram says that in July, his M&BR team became aware of various news articles reporting the suicide of Mr and Mrs Jones. 10 Mr Bertram says that on 24 July 2015, at his request, Mr Lees sent him by email copies of two suicide notes apparently made by Mr and Mrs Jones. He produces those notes to the Court. 11 On or about 28 July 2015, Mr Bertram says ASIC commenced a formal investigation pursuant to s 13 of the ASIC Act into suspected contraventions of s 1041E (false or misleading statements), s 1041G (dishonest conduct) and s 1041H (misleading or deceptive conduct) of the Corporations Act and s 378 (stealing) and s 409 (fraud) of the Criminal Code Act Compilation Act 1913 (WA) by officers of OAM, the second defendant Oceanic Equities Pty Ltd (OE), the third defendant Australian Global Capital Pty Ltd (AGC), the fourth defendant Mulato Management Services Pty Ltd (MMS) and the fifth defendant, Mulato, during the period between 15 June 2010 and 15 June 2015. 12 On 3 August 2015, Ms McCormick, one of the M&BR team, on Mr Bertram's instructions, sent an email to Chris Jones requesting a copy of the death certificates for Mr and Mrs Jones. 13 Mr Bertram says that ASIC's investigation is ongoing.

OAM 14 Mr Bertram says that from his review of historical company extracts, it appears that OAM was registered on 30 July 2004, Mr Jones had been a director since 30 July 2004 and he had been the sole director of OAM since 30 September 2010. 15 He says he is informed by Mr Lees that OAM is a fund management company. On the former website address of OAM under the heading "Our History" it states that "Oceanic was established in 2004 to act as an investment adviser to wholesale fund institutions". 16 From his review he notes that OAM held an Australian Financial Service Licence, which in part permitted it to undertake fund management activities for wholesale clients. 17 He also notes that OAM is the holding company for all of the shares in OE. 18 Mr Bertram says he is informed by Chris Jones and Mr Lees, and by reference to the website extract, that the former employees of OAM were Mr Lees, Chris Jones and an accounts administrator, Ms Pryor.

OE and MMS 19 Mr Bertram says that, from his review of information obtained from ASIC's national database, it appears OE and MMS are authorised representatives of OAM. 20 From a review of an historical company extract, he notes that OE was registered on 7 November 2006 and is a 100% owned subsidiary of OAM, and that Mr Jones had been a director since its registration and had been a sole director of OE since 22 November 2013. 21 He also notes that MMS was registered on 30 October 2009, and that Mr Jones had been the sole director of the company since its registration. 22 He says he is informed by Mr Lees that the principal activity of OE was to hold "principal equity investments", and that the principal activity was to act as "Investment Manager of AGC". 23 He adds that Mr Lees has informed him that OE and MMS did not have any other clients or any employees. 24 Mr Bertram says he is also informed by Mr Christopher Hartley Carter that he was the investor liaison manager for MMS "to act on behalf of the two private investment companies", namely, Mulato and AGC.

AGC 25 Mr Bertram says that from his review of the historical company extract for AGC, it appears AGC was registered on 29 April 2008, and that Mr Jones and Mr Carter (who lives in the UK and has since lodged his resignation with ASIC) were directors of AGC, and both had been directors since its registration. 26 He further notes from the extract of the website that AGC is a private investment company and according to Mr Lees, at the initial meeting with him, AGC trades in mining stocks and other equities listed on the Australian Securities Exchange (ASX). 27 Mr Lees also told him then that AGC does not have any employees, and that Mr Lees conducted trading on AGC's behalf.

Mulato 28 Mr Bertram says that from his review of the historical company extract for Mulato, he notes that it was registered on 18 June 1981, Mr Jones has been a director of Mulato since 1 December 1981, and the sole director since 8 April 2002, and Mr and Mrs Jones were the only members of Mulato. 29 He further notes from the extract of the website that Mulato was marketed as venture capital company. 30 He says Mr Lees told him at their initial meeting that the principal activity of Mulato was to raise funds via loan/promissory notes. 31 Mr Lees subsequently informed him that Mulato does not have employees.

Ridgeway House Pty Ltd 32 Mr Bertram says that from his review of historical company extracts, it appears Ridgeway House Pty Ltd, the sixth defendant, was registered on 30 April 2007, that Mr Jones had been a director since incorporation, and that Mr and Mrs Jones were the only members. 33 He further notes that Ridgeway was the holding company for shares issued by OAM (apart from one other shareholder), MMS and Mulato. 34 He says he has been unable to locate any records to indicate Ridgeway had any employees.

No directors or company secretaries 35 In light of these developments, Mr Bertram says that none of the defendants presently has a director or a company secretary.

Not carrying on business 36 Mr Bertram says that from his review of the historical company extracts, it appears that OAM, OE, AGC, MMS and Mulato had a registered office and/or principal place of business at Level 6, 40 St Georges Terrace, Perth, Western Australia. 37 He is informed, however, by Chris Jones and Mr Lees and believes that each are no longer operating. 38 It also appears to the Court that Ridgeway does not carry on business.

No access to premises 39 Mr Bertram further says that he is informed by Mr Lees that on or about 30 July 2015, OAM, OE, MMS, AGC and Mulato ceased operating. In that regard he received an email from Mr Lees on 5 August 2015 indicating that the landlord issued a notice which was effective immediately and Ms Pryor, Chris Jones and Mr Lees handed back their keys and lift access passes so that they no longer have access to the office. 40 It also appears to the Court that Ridgeway has no premises.

Lack of employees 41 Mr Bertram further says that in an email from Mr Lees to Ms McCormick that OAM, OE, MMS, AGC and Mulato do not have employees. In that regard Mr Lees said in an email on 29 July 2015 that Chris Jones and he were not directors or shareholders of any of the entities "that have been served" but are happy to assist in their capacity as "ex-employees". 42 Nor does Ridgeway appear to have any employees.

Lack of records and/or access to computer server 43 Mr Bertram further says that OAM, OE, MMS, AGC and Mulato do not currently have in their possession any company records and do not have access to their server. 44 He says Ms McCormick has told him and on 29 July 2015 she served on OAM, MMS, AGC and Mulato at their principal places of business or registered address of Level 6, 40 St Georges Terrace, Perth various notices to produce documents pursuant to s 33 of the ASIC Act. 45 He says on 30 July 2015, he attended these same premises. Chris Jones and Mr Lees provided to him records held by OAM, OE, MMS, AGC and Mulato. 46 On 30 July 2015, they also provided to him the computer server maintained by OAM, OE, MMS, AGC and Mulato.

Some assets 47 Mr Bertram says that from the records he has received, and from the limited investigations made by ASIC to date, it appears OAM, OE, MMS, AGC and Mulato have minimal assets. 48 In that regard there are some shares held by AGC to the value of approximately $400,000. 49 Mulato holds shares to the value of approximately $40,000. 50 From communications with Mr Lees and Mr Carter, it is understood by Mr Bertram that Mr Jones liquidated almost all of Mulato's equities over the last 18 months or so for what he said was being invested into "crushing contracts". Of the listed liquid shares it appears there is only about $40,000 comprised of three stocks. The ledgers apparently indicate lots of unlisted positions but in reality Mr Lees believes only one recent purchase of convertible note has any chance of being listed and traded. That was a $19,000 investment. All up, Mr Lees estimated around $360,000 in liquid listed shares is left and about $7,000 in bank accounts, and the margin loan balance is nil. 51 On or about 5 August 2015, Mr Lees indicated that the listed liquid holdings of AGC would be worth about $400,000 on today's prices "give or take $15k". 52 Further, OAM, OE, MMS, AGC and Mulato have minimal cash assets held with Westpac Corporation Limited. 53 ASIC have issued a notice pursuant to s 33 of the ASIC Act to Westpac for information. The Westpac response indicates that: (1) OAM has a credit in a bank account of $129.78 and a debit in another account of $573.41; (2) OE has a credit in a bank account of $1.98 and a credit of $1,282.14 in another bank account; (3) AGC has a credit of $7,620.83 in one account and a debit of $357.54 in another; and (4) Mulato has a credit of $41.91 in one account and a credit of $29,270.02 in another. 54 Mr Bertram points out that, based on the ASIC investigation to date, it appears Mulato has clients and AGC has shareholders and Mr Carter has provided a list of Mulato clients and a list of AGC's shareholders.

Assets held by Mr Jones 55 Mr Bertram says the result of inquiries made by Ms McCormick on his instructions with the probate division of the Supreme Court of Western Australia is that it appears no application has been made for a grant of probate or letters of administration or the appointment of an executor or administrator to the deceased estates of Mr and Mrs Jones. 56 ASIC's preliminary investigations reveal that Mr Jones' estate holds some assets in Australia. 57 He refers to property in Como held jointly by Mr and Mrs Jones with possible equity of perhaps $800,000 (taking into account the registered mortgage with Westpac). 58 Further, Mr Jones held in excess of $11,000 in another account. 59 It would also appear Mr Jones held an account with ANZ Australia. 60 Mr Jones also appears to hold a property in the UK, subject to a mortgage. It would also appear to hold an account with a Royal Bank of Scotland with a credit of balance. 61 ASIC submits that in order to assist ASIC's investigation, it is necessary for a trustee to be appointed to Mr Jones' estate and preservation orders to be granted to preserve the property in the deceased estates of Mr Jones and Mrs Jones in order to protect the interests of persons aggrieved by Mr Jones' alleged misconduct, preserve personal assets, and prevent unauthorised dissipation of Mr Jones' personal assets. 62 In that regard, ASIC by Ms McCormick has been in communication with the Public Trustee as well as various parties who are potentially interested in the deceased estates of Mr Jones and Mrs Jones. Chris Jones, Mr Jones' brother and Mrs Jones' brother have each been advised of ASIC's intention to apply for the above orders to preserve the assets of the deceased's estates. To date, it appears that no interested party has responded.

Consents to act 63 As to the appointment of a trustee for Mr Jones' estate, Mr Kim Wallman of HLB Mann Judd (Insolvency WA) has consented to act and the terms on which he would act and his charge out rates have been provided to the Court. 64 As to the appointment of a provisional liquidator to each of the defendants, Mr Vince Smith, official liquidator of Ernst & Young, has consented to act as a provisional liquidator. 65 As to the appointment of an official liquidator to wind up each of the defendants, Mr Bertram states that he understands that the only other former director of AGC, Mr Carter, supports an application for the winding up of AGC and produces an email of Mr Carter dated 4 August 2015 in that regard.

Should a provisional liquidator be appointed to each defendant 66 By s 472(1) and (2) of the Corporations Act the Court has the power to appoint an official liquidator or an official liquidator provisionally. 67 In Australian Securities Commission v Solomon (1996) 19 ACSR 73, at 80, Tamberlin J identified six principles to be considered when exercising the power to appoint a provisional liquidator: (1) The Court should only appoint a provisional liquidator where it is satisfied that there is a valid and duly authorised winding up application and that there is a reasonable prospect that a winding up order will be made. See Debelle J in Re J N Taylor Holdings Ltd; Zempilas v JN Taylor Holdings Ltd (1990) 3 ACSR 600 at 614. (2) The fact that the assets of the corporation may be at risk is a relevant consideration. (3) The provisional liquidator's primary duty is to preserve the status quo to ensure the least possible harm to all concerned and to enable the Court to decide, after a further examination, whether the company should be wound up: Re Carapark Industries Pty Ltd (in liq) (1966) 9 FLR 297 at 303. (4) The Court should consider the degree of urgency, the need established by the applicant creditor and the balance of convenience: Re Club Mediterranean Pty Ltd (1975) 11 SASR 481 at 484. The power is a broad one and circumstances will vary greatly. Commercial affairs are infinitely complex and various and it is inappropriate to limit the power by restricting its exercise to fixed categories or classes of circumstances or fact. (5) It may be appropriate to appoint a provisional liquidator in the public interest where there is a need for an independent examination of the state of accounts of the corporation by someone other than the directors. See Tickle v Crest Insurance Co of Australia Ltd (1984) 2 ACLC 493. (6) Where the affairs of the company have been carried on casually and without due regard to legal requirements so as to leave the Court with no confidence that the company's affairs would be properly conducted with due regard for the interests of shareholders, it may be appropriate to appoint a provisional liquidator. See Montgomery Windsor (NSW) Pty Ltd v Ilopa Pty Ltd (1984) 2 ACLC 224. 68 These principles have also been considered appropriate in the recent decisions of Australian Securities and Investments Commission v ActiveSuper Pty Ltd (2013) 93 ACSR 189 at [16]; [2013] FCA 234 and Australian Securities and Investments Commission v Planet Platinum Limited [2015] VSC 273 at [43]. 69 Consequently, it is understood that the appointment of a provisional liquidator pending the determination of a winding up application is something done rarely. In some authorities it is referred to as a "drastic measure", but one that may be required to preserve the status quo: Zempilas v JN Taylor Holdings Ltd (No 2) (1990) 55 SASR 103 at 106; Constantinidis v JGL Trading Pty Ltd (1995) 17 ACSR 625 at 635; Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd (2003) 47 ACSR 197 at [105]; [2003] NSWSC 535; Australian Securities and Investments Commission, in the matter of Bennett Street Developments Pty Ltd v Weerappah (No 2) [2009] FCA 249 at [8]; Australian Securities and Investments Commission v Tax Returns Australia Dot Com Pty Ltd [2010] FCA 715 at [86]. 70 In the circumstances of this case, as they appear at the time of the hearing of the application for interim orders, it is difficult to imagine otherwise than that a final winding up order of each of the defendants will be made under the just and equitable ground, s 461(1)(k) of the Corporations Act, in due course. 71 Applying the principles set out above in the circumstances of this case, where the possible financial circumstances of a range of aggrieved persons may be affected by the management and administration of the defendant companies, where the former guiding mind of each company, Mr Jones, has died, and none of the defendants appear to be carrying on any business, occupying any premises, engaging employees or otherwise, in a practical sense, existing, it is appropriate that the interim relief sought be granted to enable ASIC to complete its investigation, under the ASIC Act, in relation to the affairs of the companies.

Should an interim trustee be appointed? 72 By s 1323 of the Corporations Act, the Court has the power to prohibit payment or transfer of money, financial products or other property. By subs (1), where an investigation is being carried out under the ASIC Act, as it is here, in relation to an act or omission by a person that may constitute a contravention of the Act, the Court has the express power under (e) to make an order prohibiting a person holding money, financial products or other property on behalf the relevant person, or on behalf of an associate of the relevant person, from paying all or any of the money, or transferring, or otherwise parting with possession of, the financial products or other property, to, or to another person at the direction or request of, the person on whose behalf the money, financial products or other property is or are held. Further, the Court has the power under subs (f) to prohibit the taking or sending out of the jurisdiction or out of Australia by a person of money of the relevant person or of an associate of the relevant person. Under (g) the Court may also make an order prohibiting the taking, sending or transfer by a person of financial products or other property of the relevant person or an associate of the relevant person from a place in the jurisdiction to a place outside the jurisdiction or from a place within Australia to a place outside Australia. And under subs (h) the Court may appoint a receiver or trustee of the property or part of the property of a person, if the relevant person is a natural person, or a receiver or receiver and manager of the property or part of the property of that person if it is a body corporate. 73 Under s 1323(3) where an application is made for an order subs (1), as here, the Court may, if it is of the opinion that it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application. 74 In these circumstances, the Court is empowered to make an order appointing a trustee in respect of the property or part of the property of Mr Jones. 75 In all the circumstances as they exist here, it is indeed appropriate, if not necessary, to make the interim appointment of a trustee to the property of Mr Jones so that the ASIC investigation may be completed. 76 At this point, it appears there is otherwise no personal representative for the estate of Mr Jones; or, for that matter, Mrs Jones. 77 There should, however, be liberty to apply to the plaintiff as well as to any person who may be affected by the order.

Should there be asset preservation orders? 78 The Court also has the broad power under s 1323 of the Corporations Act, as set out above, to make orders to preserve assets pending an investigation being carried out under the ASIC Act, as in this case. 79 In those circumstances it is appropriate to ensure that there is no unintended, or intended, disposition of the assets of either Mr or Mrs Jones by any person who would appear to have an interest or might have an interest in relation to such assets (such as the Public Trustee under State legislation) or any other person who may be or become a personal representative of their estates. 80 While there is no present threatened action to effect any such disposition of an interest in property held by the estates of Mr and Mrs Jones, it is as well, in the unusual circumstances outlined, for a precautionary order to be made to ensure the status quo is maintained. 81 Accordingly, it is appropriate to make orders as asked on an interim basis to preserve those assets.

Conclusion and order 82 For these reasons, the interim orders sought on behalf of ASIC were made on 24 August 2015, following the hearing of the urgent application. 83 It is understood that in due course the application for the winding up of the defendants will come before the Court, at which stage the Court will no doubt be advised by the provisional liquidator as to the current state of affairs of each of the defendants. 84 In due course it would also appear appropriate for ASIC to apply to the Court in respect of the discharge of the interim orders, once they have served their intended purpose of facilitating the current investigation by ASIC. 85 The orders made on 24 August 2015 are set out above in the orders page. I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.