s 727Australian Securities and Investments Commission v Open4Sale Global Ltd [2025] FCA 1038 | Case summary | Zoe

CTHFCA

Australian Securities and Investments Commission v Open4Sale Global Ltd

[2025] FCA 1038

Federal Court of Australia|2025-08-29|Before: Charlesworth J

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General information, not legal advice.

At a glance

Source facts

Court

Federal Court of Australia

Decision date

2025-08-29

Before

Charlesworth J

Source

Original judgment source is linked above.

Judgment (249 paragraphs)

[1]

CORPORATIONS - failure by unlisted public company and two of its directors to comply with disclosure obligations when offering securities contrary to s 727(6) of the Corporations Act 2001 (Cth) (Corporations Act) - defendants each committing 101 contraventions - failure to lodge disclosure document with Australian Securities Investments Commission in relation to the offers - distribution of offer application forms unaccompanied by disclosure document - acts of directors attributed to company under s 1317QE of the Corporations Act - contraventions admitted, but directors seeking relief from liability under s 1317S and s 1318 of Corporations Act - directors continuing their contravening conduct after receiving legal advice - directors failing to discharge burden of proof with respect to asserted honesty - relief from liability refused - consideration of consequences of contravening conduct in context of extreme deficiencies in company's record keeping - directors disqualified - pecuniary penalties imposed on directors - injunctions granted - whether there is a need for specific deterrence in respect of the company as a contravener in circumstances where the directors responsible for its contraventions are to be excluded from its management - whether the imposition of a pecuniary penalty on the company may adversely affect interests of the persons of the is intended to protect

[53]

The Australian Securities and Investments Commission (ASIC) alleges multiple contraventions of s 727(6) of the Corporations Act 2001 (Cth) against Open4Sale Global Ltd (ACN 159 248 067) (Company) and two of its directors, Mr Simeon La Barrie and Mr Ewald Hafer.
The alleged contraventions arise in circumstances where offers were made and application forms were distributed for the issuing of shares in the Company without adherence to disclosure obligations under Pt 6D.2 of Ch 6D of the Corporations Act. The allegations relate to 101 offers of shares made between 13 March 2019 and 26 July 2023 (Relevant Period).
As against each of the defendants, ASIC seeks declaratory relief, orders for pecuniary penalties under s 1317G, orders for injunctive relief under s 1324(1) and an award of costs. It further seeks disqualification orders under s 206C and / or s 206E of the Corporations Act against Mr La Barrie and Mr Hafer.
As explained below, by the first day of the trial, all of the defendants had admitted that they had each contravened s 727(6) of the Corporations Act by reason of their non-compliance with s 727(1) and / or s 727(2). However, Mr La Barrie and Mr Hafer sought to be relieved under s 1317S of the Corporations Act from the liability to which they would otherwise be subject or that might be imposed upon them because of their contraventions. Additionally (or alternatively) they each submitted that the Court should make an order relieving them from liability under s 1318 of the Corporations Act. To be relieved under those provisions Mr La Barrie and Mr Hafer must show (among other things) that they have acted honestly.
For the reasons given below, I am not satisfied that the defendants have acted honestly in relation to their otherwise admitted contraventions. I will proceed to make declarations and to grant most of the additional remedies sought by ASIC, founded in part on the defendants' admissions and in any event on the facts found on the evidence adduced by ASIC.
Despite their protestations to the contrary, I consider the contraventions of Mr La Barrie and Mr Hafer to be particularly serious given the states of mind accompanying them. I have concluded that each of them had a blatant disregard for the law. As explained below, the contraventions have contributed to a situation in which 83 affected persons can have no confidence in precisely what they have invested in and they are deprived of avenues of legal recourse that might otherwise have been available to them under the Corporations Act, had the contraventions not occurred.
The Company's contravention arises because the relevant acts of Mr La Barrie and Mr Hafer must be attributed to it. However, by reason of the disqualification orders to be made against Mr La Barrie and Mr Hafer, each of them will be precluded from participating in the management of the Company. I have concluded that the removal of the individual wrongdoers from the Company's Board of directors has eliminated the need for pecuniary penalties as a specific deterrent measure against the Company itself. I have also concluded that the objective of general deterrence is served by the suite of orders to be made against the individual defendants. In addition, I am satisfied that the imposition of a penalty on the Company itself may ultimately harm the shareholders of the Company (including those who may have been induced to become shareholders by reason of the contraventions), although not for the reasons advanced by Mr La Barrie and Mr Hafer. For those reasons, I have concluded that there should be no pecuniary penalty ordered against the Company.
There will otherwise be declarations and orders substantially in the terms sought by ASIC, namely:

[68]

(1) the word "securities" includes a share or a debenture in a body (s 700(1));

(2) a debenture includes a loan (s 9);

(3) the phrase "make an offer of securities" includes inviting applications for the issue of the securities (s 700(2));

(4) a reference to the doing of an act or thing includes a reference to causing or authorising the act or thing to be done (s 52);

(5) the person who offers securities is the person who has the capacity, or who agrees, to issue or transfer the securities if the offer is accepted (s 700(3));

(6) an offer of securities for issue (other than a crowd source funding offer) requires disclosure to investors unless s 708 or s 708AA state otherwise;

(7) a "disclosure document" relevantly includes an "information statement" (s 9);

(8) section 705 contains a table showing the types of disclosure documents that may be used;

(9) an information statement is the least prescriptive form of disclosure document and may be used where the amount of money to be raised by the issuer does not exceed $10 million (taking into account certain prior activities of the issuer) (s 705 (item 4), s 709);

(10) the content of an information statement is prescribed in s 715; and

(11) as conveniently summarised in ASIC's written submissions, an information statement must:

(a) identify the body and the nature of the securities (s 715(1)(a));

(b) describe the body's business (s 715(1)(b));

(c) describe what the funds are to be used for (s 715(1)(c));

(d) state the nature of the risks involved in investing in the securities (s 715(1)(d));

(e) give details of all amounts payable in respect of the securities (s 715(1)(e));

(f) state that a copy of the statement has been lodged with ASIC and that ASIC takes no responsibility for the content of the statement (s 715(1)(f));

(g) state that the statement is not a prospectus and that it has a lower level of disclosure requirements than a prospectus (s 715(1)(g));

(h) state that investors should obtain professional investment advice before accepting the offer (s 715(1)(h));

(i) include a copy of a financial report for the body (s 715(1)(i)), which is for a 12-month period with a balance date that occurs within 6 months before the securities are first offered under the statement, prepared in accordance with accounting standards and audited (ss 715(2)(a)-(c));

(j) include any other information that the regulations require (s 715(1)(j)); and

(k) state that no securities will be issued on the basis of the statement after the expiry date specified in the statement (s 715(3)).

[75]

I have mentioned that a purpose of Ch 6D of the Corporations Act is the protection of investors involved in capital raisings. At this juncture, it is appropriate to point out the pivotal function of s 727 in achieving that objective.
Section 718 of the Corporations Act provides that a disclosure document to be used for an offer of securities must be lodged with ASIC. Under s 720 of the Corporations Act, the offer of securities for issue requires the consent of every director of the company. It is an offence to process applications for non-quoted securities under an offer that needs a disclosure document until seven days after the disclosure document is lodged. If a person offers securities for issue under a disclosure document, the person must hold in trust any money received in respect of the offer until the securities are issued or transferred, or until the money is returned to the person: Corporations Act, s 722(1). It is a criminal offence to fail to comply with that requirement: Corporations Act, s 722(3).
Under s 715(3) of the Corporations Act, a disclosure document in the nature of an information statement must be given an expiry date, not later than 13 months from the date of the statement.
If a person receives an application for the issue of shares after the expiry date, the person must either return any money received from the applicant, give the applicant a new disclosure document and allow the applicant one month to withdraw the application and be repaid, or issue the shares to the applicant and give them a new disclosure document and a month to withdraw the application and be repaid: Corporations Act, s 725(2) and (3). It is a criminal offence not to comply with those requirements: Corporations Act, s 725(1A).
Section 728(1) of the Corporations Act prohibits the making of offers under a disclosure document if there is a misleading or deceptive statement in the document or any application form accompanying it, or an omission of material required by (relevantly) s 715, or a new circumstance has arisen that would have required inclusion. A person is taken to make a misleading statement in a disclosure document about a future matter (including the doing of, or refusing to do, any act) if they do not have reasonable grounds for making the statement: Corporations Act, s 728(2). Subject to some defences, a person commits a criminal offence if they contravene s 728(1) and the misleading statement or omission is materially adverse from the point of view of an investor.
Again subject to some defences, an investor who suffers loss or damage because an offer of securities under a disclosure document contravenes s 728(1) may recover the amount of the damage from a person referred to in a table contained in s 729(1). They include not only the person who has contravened s 728, but a director of a corporate contravener, and also persons who have provided information for inclusion in the disclosure document with their consent.
Section 739 of the Corporations Act confers upon ASIC the power to make orders (known as stop orders) where it is satisfied that an offer of securities under a disclosure document lodged with it would contravene s 728 of the Corporations Act. If such an order is made, no offers, issues, sales or transfers of securities may be made while the order is in force.
The combined effect of those provisions is to create an enforcement regime incorporating the imposition of criminal liability on persons who consent to the provision of information contained in disclosure documents, on directors of companies to which disclosure documents relate, and on those who may make offers or distribute application forms under disclosure documents. ASIC's regulatory functions are reinforced by its powers to make a stop order in connection with a disclosure document that has been lodged, so preventing a person from offering securities or distributing application forms under or purportedly under the lodged document.
Importantly for present purposes the remedial provision in s 728 only applies in connection with a document that meets the description of a "disclosure document", which in turn is defined (in s 9) to mean a disclosure document that has been lodged with ASIC. In cases where no document is lodged with ASIC at all, that remedial mechanism is lost and some of the provisions relating to misleading statements are not enlivened. Affected investors in such a case may have remedies under s 1041H of the Corporations Act, however that is neither a criminal offence provision nor a civil penalty provision, and the action may not, as of right, be brought against the same array of people mentioned in s 729. A person who makes offers of shares in circumstances where no disclosure document has been lodged therefore engages in conduct that significantly undermines the efficacy of the regime established under Ch 6D of the Corporations Act and deprives investors of some avenues of relief.
In addition to the regulatory importance of s 727, the mandatory content of a compliant information statement is such that an investor will be provided with audited information about a company's financial position, so as to make an informed decision about the investment described in the statement.

[95]

The 101 offers forming the subject matter of this proceeding are evidenced and analysed in the affidavit of Ms Holli-Rebecca Linklater, a Senior Investigator within ASIC's Enforcement and Compliance Division. That affidavit annexes the source documents evidencing the making of offers for shares in the Company and the issuance of shares upon the making of payments to the Company totalling $1,379,750.00.
Ms Linklater analysed deposits made to the Company's bank account held with the Commonwealth Bank of Australia (CBA Account) during the Relevant Period. She identified the person making the deposit and matched (or substantially matched) each name to those appearing in the Company's share register. The deposits were shown to have been made within 30 days of the date appearing on a share application form relating to the person. Where possible, Ms Linklater then matched the share application forms with issued share certificates, confirming that shares were issued to each person in numbers matching those applied for in the respective share application form. In all but four cases, the date on the application form was within 35 days of the date shown on the share certificate. Of the four exceptions, one application form appeared to contain a date error for the relevant year, and the remaining three were shown to be the subject of correspondence indicating that a longer time was taken for the share certificate to be completed.
As a result of that review, Ms Linklater identified 126 instances where deposits into the CBA Account matched share application forms and the Company's share register. There were 111 share certificates matching the 126 offers evidenced by the application forms and fund deposits.
Ms Linklater then reviewed those 126 offers to determine whether shares were issued by the Company to more than 20 unique investors in the 12 month period preceding each offer. Her analysis was not disputed and need not be detailed here. As a result of that analysis, ASIC relies upon 101 offers as forming the subject matter of the allegations of contravention. They are identified at annexure HRL2 to Ms Linklater's affidavit. It is those 101 offers that are admitted by the defendants and otherwise proven on the evidence before me. The fact that the offers were made and the application forms distributed may be readily inferred from the documentary evidence.
The offers were made to 83 people, referred to as "investors". The amounts invested by them range between $1,000.00 and $50,000.00.

[112]

In Hall v Poolman (2007) 215 FLR 342, Palmer J (at [322]) emphasised that a person's imprudence would not of itself constitute dishonesty, unless it was "so reckless as to lead to the conclusion that the person could not have been making any genuine attempt at all to act in accordance with his or her duty". See also Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 (at [419]).
Written submissions on this topic were originally filed on behalf of Mr Hafer and the Company through their lawyer. Mr La Barrie was unrepresented at the commencement of the trial. However, by the end of the first day he had retained the same lawyer as the Company and Mr Hafer (having previously retained that lawyer at the time that the proceeding was commenced). Through Counsel, Mr La Barrie confirmed that he adopted the written submissions previously filed on behalf of the other defendants. Those submissions asserted in some detail the reasons why the Court should exercise its discretion under s 1317S or s 1318.
Joint supplementary written submissions were later filed on behalf of all of the defendants. For the most part they are a duplication of the original submissions with some material redacted and with the addition of further contentions. ASIC submits that the amendments to the submissions have introduced some uncertainty as to whether Mr La Barrie persists with his reliance on s 1317S and s 1318. I agree. The uncertainty arises because in some instances references to "defendants" have been deleted and replaced with references to Mr Hafer alone.
Nonetheless, there has not been a complete abandonment of the case put forward on Mr La Barrie's behalf at the hearing, which plainly included a claim to be relieved from liability. Rather, there appears to be a shift in the factual propositions put forward in support of Mr La Barrie's case. As far as I can discern (interpreting the submissions generously in his favour) Mr La Barrie persists with assertions that the following facts and circumstances justify the grant of relief:

[117]

The Company was first registered in 2012. It is an unlisted public company. Mr La Barrie has been a director of the Company since its incorporation and was its secretary until 30 September 2020. Mr Hafer first became a director on 1 March 2019. Mr Fry was a director for a period in 2019, and again from 6 October 2020 onward. Mr Pinksterboer was a director between 29 June 2012 and 18 September 2012.
In addition to his directorship of the Company, Mr La Barrie is a director and a shareholder of Open4Sale Technology Corporation, a company registered in Delaware in the United States of America (USA Company). It is the surviving entity following a merger with another USA entity, Open4SaleUSA Inc. The number of shares held by Mr La Barrie in the USA Company is unclear, although a 2020 tax return records him as the 100% owner.
Mr La Barrie is also the director of Open4Sale International Pte Ltd (Singapore Company). A document in evidence asserts that he owns 97 of the 108 issued shares in the Singapore Company, the remaining 11 shares are held by citizens of Singapore. There is uncertainty in the evidence as to whether Mr La Barrie is or asserts to be the legal owner of the shares referred to in that document.
Another records suggest that the Company may own 23.4% of the shares in the USA Company, however, it has not been independently verified. In light of the Company's extremely poor record keeping, I can place no weight on that document. It is contradicted by other material before me and none of the directors gave evidence in this proceeding to resolve the uncertainty surrounding the relevant corporate relationships.
The same document asserts that Mr La Barrie owns 41.54% of the shares in the USA Company and that his two children together own 3%.
In his Concise Response, Mr Hafer asserted that certain rights were held "on trust" for Australian shareholders and there were assertions of a "trust" in some of the examination transcripts. However, the documents produced to ASIC or otherwise obtained under compulsive processes do not evidence the existence of any express trust (whether by Deed or otherwise). Mr La Barrie did not give evidence to support the existence of any express trust or the terms of any such relationship. I express no view as to whether there may be a resulting or other type of trust.
Neither Mr Hafer nor Mr Fry could point to any document showing that the Company owned shares in either of the foreign companies. Mr Hafer said he believed the Company owned "about 30 per cent" of the Singapore Company and "about the same amount" in the USA Company. He said that the source of his information was Mr La Barrie but added that there were no documents in the nature of share certificates "because we're still determining what the final percentages are".
Mr Fry could not say how the Company had any interest in the Singapore Company. He said his information about the Singapore Company and USA Company was provided to him by Mr La Barrie and not based on documents. His examination on that topic proceeded as follows:

[124]

Mr La Barrie asserted that the money taken from the Company was also deployed by the USA Company for research and development (including for the payment of subcontractors) and that the USA Company had initially been established to help him to obtain a green card. He asserted that the money taken for research and development was in the nature of a loan from the Company.
Mr La Barrie's assertions that he drew money from the CBA Account in order to fund research and development activities related to the commercialisation of software are not independently verifiable on the evidence and I am not satisfied that they should be afforded any weight. The circumstances are such that no other person had access to the CBA Account and any information the other company directors had about the utlisation of money was information provided by Mr La Barrie.
Whilst the other directors had access to the CBA Account bank statements, it was necessary for them to seek explanations from Mr La Barrie as to what specific items of expenditure were for. Mr La Barrie was the only person asserted to have paid invoices referable to any business activities associated with research, development or commercialisation of software. Neither Mr Fry nor Mr Hafer had visibility of the payment of money into or out of the Wells Fargo Bank NA accounts or any other account to which the raised capital was transferred.
To the extent that unaudited financial statements exist for the Company, they too are said on their face to have been based on information provided by the directors. Evidence adduced in this proceeding gives the Court no reassurance that they were prepared on the basis of any conventional or reliable system of record keeping.
Mr La Barrie acknowledged that there were no documents evidencing the existence of any loan between the Company and any entity to which the capital was transferred.
When questioned further about the movement of money from the CBA Account, Mr La Barrie gave the following responses:
1. So those funds are, at some point in time, repayable to the Australian based company because they are a loan to the US company?
2. How do I explain it because you guys will be the experts? Obviously shareholders are putting money in and they have got equity, right okay. I have, the way I do it though every time I move the money, right okay, I have done it as a loan on purpose to show the US company I have got to pay it back.
3. Mmm-hmm.
4. That is why I do it for. So I want the IRS knowing, right okay, that you have given me 10 grand, right okay, woo-hoo, blah, blah, blah. To obviously keep my tax down in the US, it is hang on guys, the money that Holli gave us, right okay, I have got to pay it back one day.
5. Yes.
6. So the US side, all the money coming in from Open4Sale Global is classified as a loan from the AU entity.

[135]

A Chairman's message contained in the 2019 Annual Report (also prepared in 2022) referred to a "USA subsidiary", and a further Chairman's message of 2021 referred to a "Singapore subsidiary".
Following his s 19 examination, Mr Fry produced to ASIC the Company's unaudited financial statements for the financial years ending 30 June 2023 and 30 June 2024. The 2023 statements contained (for the first time) a reference to an asset with a value of "$10,547,765" with the description "Loans - Open4Sale US Subsidiary", comprising its total assets (other than an amount of $6,110 cash at bank). The financial statements for that year do not otherwise record any other asset in the nature of shares or intellectual property. The 2024 statements record that the "loan" said to be owing to the Company had increased to "$11,802,026" representing all of the Company's assets (other than an amount of "$4,910" cash at bank).
In his s 19 examination (conducted on 23 January 2023), Mr La Barrie said that there were no documents in existence recording that the Company was owed money by the Singapore Company or the USA Company.
There is no explanation of the loans in the financial statements, nor do the financial statements record any revenue in the nature of interest on the loans. There is no documentary evidence of the terms (if any) of any loan agreement between the Company and the USA Company. It may be that the financial accounts reflect a circumstance in which all of the capital raised by the issue of shares in the Company has been spent by other persons or entities in circumstances giving rise to an obligation to repay.
The Company did not maintain its own share register prior to March 2022. The documents it provided ASIC to evidence its memberships comprised bank account details showing cash receipts together with share application forms and some share certificates. In August 2021, the Company engaged an external provider to prepare a share register. The register it produced inaccurately describes some shareholders as having a "first investment date" of 1 March 2022. I infer that the Company had not given the external provider sufficient records for an accurate date to be included. Proof of the 101 contraventions in the present case does not depend on the "start date" referred to in the share register but instead is achieved by the process described in Ms Linklater's affidavit.

[138]

Mr Hafer's explanation for BDO not continuing with an audit is consistent with other evidence about the lack of records sufficient to enable an audit to be conducted at all.
I find that the causes of the BDO engagement coming to nought was the failure of Mr La Barrie to cooperate in the provision of funds to pay the auditors coupled with an absence of records sufficient to enable an audit to be conducted.
In March 2023, Mr Stephen Noble of Australian Independent Audit Services was engaged to prepare audited financial statements for the Company. In his affidavit, Mr Noble explained that he attended a meeting at the office of the Company's lawyer at which Mr La Barrie, Mr Fry and Mr Hafer were present. He said that in March 2023 he sent a letter of engagement for the conduct of audits for the years ending 30 June 2017 to 30 June 2022, together with a request for documents (including an updated shareholders list). The engagement letter was signed by Mr Fry in April 2023.
In his affidavit, Mr Noble said that as part of the audit process he was given access to the Company's Xero accounting file which appeared to him to be "grossly inadequate". He said that the Xero system and the financial statements provided to shareholders did not match. In May 2023, Mr Noble sent an email to the Company's directors and lawyers setting out the items that were required to progress the audit. Mr Noble was not provided with the information he had sought. He reiterated those requests in June 2023. He emphasised the importance and urgency of a need for a response. After a further request to provide the information, Mr Noble terminated the appointment because his requests for information had been ignored. Mr Noble later received a telephone call from Mr Fry asking if he would consider changing his mind and continue with the audit. Mr Noble declined that request. He did not receive any communications from Mr Hafer or Mr La Barrie. As at the date of his affidavit (August 2024), Mr Noble had not been paid for the work he had undertaken in progressing the audit.
Mr Noble's affidavit was not objected to, nor was Mr Noble required to attend for cross-examination. I accept the truth of his evidence and find that a reason for the termination of the engagement was Mr La Barrie's failure to provide records to facilitate the audit, including records relating to his own drawings from the Company's funds to fund his personal lifestyle.

[156]

Hi Brendan,

Thank you for the detailed analysis of the status of the 'company'

From my interpretation of this advice the directors have two choices;

Continue on the current trajectory in the face of the advice that sets out that the Directors are presiding over a $7m fraud wherein the sale of shares are being misrepresented and shares are being sold in a company with no assets and with no control over the assets with the funds siphoned overseas and spent with no oversight. This choice will see the directors prosecuted and the entire company collapse - the failure of the company to complete the Audit will result in ASIC prosecution and the rest will follow from that; or

Act immediately on the recommendations set out in the letter and write to all subsidiary company's directors and spell out what is required and get it all resolved urgently, we must minute [all] correspondence and meetings including telephone conversations.

We have very little time because assuming that AGM date is successfully extended to March 2022, effectivity everything needs to be fixed across Australia, US and Singapore and the Audit completed by January 2022

(3) The lawyer confirmed the likelihood of prosecution and that Mr Pinksterboer was correct in terms of the actions required and the level of documentation required.

(4) Mr Pinksterboer's response raised another matter to address, being "the sale of shares to raise capital in the face of the advice" that had been given, adding four numbered paragraphs as follows:

I would presume that share sales must halt;

Where the company is in receipt of funds from shares sold recently those funds should be held 'in trust' in the company account until it resolves a solution

If the Board elects to carry on per option 1 then the directors will have to consider their positions? (potentially the board is then knowingly complicit in ongoing illegal conduct?)

If the board elects to proceed with option 2 then that process will have to be underway before any more capital can be raised or released?

(5) The lawyer gave the following responses:

Share sales without a disclosure document are a breach of the Corporations Act unless you fit within one of the exemptions - I cover them below. With no actual ownership of offshore assets they must stop;

2. Yes;

If there are funds in the US account they can and should be used to cover issuing of shares to aussie shareholders in the US Company to mirror the aussie shareholding as per what was promoted to the aussie shareholders. Same for Sgp Co. This then is using funds to complete appropriate ownership of shareholdings in offshore companies as was understood by the buyers. If there are funds in the Aussie account they should not be paid into the US account but should be paid to whomever undertakes the share transfer/issue in the US, and in Sgp. I

In other words if funds are used to issue or transfer shares so the offshore ownership structure in both countries becomes what it should be then the directors would be doing the right thing.

[175]

Open4sale Global Shareholder Petition October 2024

A shareholder approached the directors to provide this petition to all the shareholders.

The shareholder verbally requested against the director's wishes:

I request a petition prepared by myself be sent to all the shareholders of o4s Global.

We have at your request sent you the enclosed petition for your perusal and decision. For further information or discussion please contact [name] on [phone number]

-------------------------------------------------------------------------------------------------------

OPEN4SALE (O4S) SHAREHOLDERS PETITION TO ASIC AND ITS PROSECUTION THAT IS DETRIMENTALLY AFFECTING SHAREHOLDERS INVESTMENT.

(This petition excludes the CEO, Simon La Barrie Director and Ewald Hafer Director)

It has come to our attention as shareholders that:

1. ASIC has acted on unfound accusations that Open4Sale is probably a scam and our belief is the person making the scandalous statement to ASIC was not a shareholder.

ASIC intruded into the O4S accounts overseas, namely Wells Fargo. These actions caused Wells Fargo to close the US company accounts in the O4S name i.e. our account based on concerns that it was a scam.

O4S, as a company requires operating accounts to continue the transactions of the business. This was impeded by ASIC and when our CEO moved to set up another operating account, he found that other banks were suspicious due to the Wells Fargo saga, making it much harder and being questioned when applying, to set up another account.

ASIC's actions based on unfound accusations from a person who does not even own shares, has caused damage to our brand name in the global arena.

We as shareholders of the Australian company are hoping for a satisfactory outcome in the very near future and for our investments to be realised, but we find that ASIC's investigation has seriously impeded our progress.

We as shareholders assume that ASIC conducted no due diligence, and investigations were done on the person making the accusations.

ASIC accessed with their power, and unknowingly to the CEO, the account in Wells Fargo, without asking the CEO (La Barrie) for statements first. He would have provided them on request. This has had serious global implications on our brand.

ASIC's intervention and use of their power to access accounts overseas thereby damaged our brand and, in turn, had the impact of impeding our investments.

We as shareholders of the Australian company are extremely concerned that defending this action has cost significant legal fees and will cost the company significant monies in terms of any fines that may be levied in circumstances where none of the shareholders believe that the prosecution is for the benefit of the shareholders themselves or the company and in fact quite the contrary.

This is not a scam. We as shareholders are not happy with ASIC's conduct. ASIC is under legislation enforced to protect us, but in fact has caused us damage by their actions.

The actions against our CEO La Barrie and Director Ewald Hafer does nothing to assist, other than doing further damage to the brand and their personal reputations.

We reiterate that ASIC has cost us heavily in legal fees and will cost us heavily due to potential heavy penalties being imposed on our company. We have at this point, not calculated the total losses to our brand.

All actions have been costly to us, and have been of no benefit to us, the shareholders, nor to the Australian taxpayer.

Our brand and pecuniary losses have been substantial ever since ASIC began its investigation based on unfounded accusations. We will consider how to move forward after the damage, which may include approaching the Media, if need be, where this harassment continues through misuse of power.

The shareholders who have signed this petition and, we consider all of those who have not yet responded, are not happy with this ongoing debacle.

Open4sale Global Shareholder responders in agreeance with this petition

...

[177]

Having regard to the facts and circumstances as found above, there is no proper evidentiary basis for a conclusion that Mr La Barrie is a person who could or should be granted any form of relief under s 1317S or s 1318 of the Corporations Act. In addressing the submissions on that topic, I will take the opportunity to make findings about the seriousness of Mr La Barrie's contraventions having regard to the state of mind accompanying them.
The submission that Mr La Barrie's contravention was "a result of ignorance and naïveté" is so far removed from reality it hardly needs addressing. It is dispelled by the singular circumstance that upon receiving unequivocal legal advice on the very topic, Mr La Barrie continued to contravene s 727 of the Corporations Act. Moreover, to the extent that Mr La Barrie invites the Court to find that he was ignorant of the requirements of Ch 6D of the Corporations Act before the legal advice was received, he adduced no evidence to support such a finding. It is reasonable to infer (and I find) that had Mr La Barrie received legal advice at an earlier time, he would have ignored it, just as he ignored the advice of the Company's lawyer when it was received. I find that Mr La Barrie knew that a compliant disclosure document included a requirement to include audited financial statements. I find that he was initially unwilling to incur that expense. I further find that Mr La Barrie later did not cooperate with Mr Noble's attempts to perform an audit by providing the necessary records to facilitate it. He did not provide Mr Noble with even the most rudimentary information necessary for the audit to progress, nor did he take any step to facilitate the provision of the information by other means.
There is no basis to conclude that Mr La Barrie had any genuine intention to have audited financial statements prepared for the Company at all, and hence no basis to conclude that he intended to prepare a compliant disclosure document.
Mr La Barrie bears the onus of proving that he has acted honestly. Any director who acts contrary to legal advice cannot be found to have acted honestly in the relevant sense.
Of itself, that is sufficient to conclude that no relief under s 1317S or s 1318 can be granted, honesty being an essential prerequisite to the exercise of the Court's discretion to grant Mr La Barrie relief under either provision. For completeness I will deal with the remaining submissions made on his behalf.
Mr La Barrie's submission that investors have not been harmed because they were provided with information about their investment by way of the pitch decks, is startling to say the least. There is no reliable and verifiable evidence against which the accuracy of the information contained in the pitch decks can be assessed by the investors themselves, let alone the Court.
The pitch decks convey the impression that investors would have an interest in an entity that owned assets in the nature of intellectual property or at least an interest in a company operating a business for the commercial exploitation of that intellectual property. On the available evidence, there is no proper basis to conclude that the shareholders to whom the contravening offers were made have in fact invested in anything of that kind. It may be that they have nothing more than rights of a shareholder in a company that has advanced interest-free unsecured loans to other persons or entities pursuant to an undocumented arrangement and in circumstances where it is doubtful that verifiable records of the expenditure of the borrowed money have been kept at all. The circumstance that an asset in the nature of a loan finally appeared on the Company's balance sheet in 2023 is remarkable for its timing (given there was no receivable of that kind in any prior financial year).
There is real doubt as to the reliability of the Company's financial statements in any event given that they have not been audited and that two of the three directors had little financial oversight or information. The only auditor who had glimpsed the underlying records of the Company (specifically its accounting software) was of the view that they were not consistent with financial statements provided to shareholders. In light of that evidence, the submission that shareholders have been provided with adequate information concerning the nature and risks of their investments by means other than the provision of a compliant disclosure document is unsustainable.
I should emphasise that the Court's present focus remains on the particular contraventions that are the subject matter of this proceeding and not on other wrongdoing. However, it is Mr La Barrie who has put the truth of the pitch decks in issue by raising their existence as a mitigating factor. On the material before me I am not satisfied that the pitch decks contain accurate information such that the failure to comply with s 727 with respect to each contravening offer has no real or lasting consequence.
To similar effect, it was submitted that in terms of improving consumer outcomes, the capital raising undertaken in this case "was not 'predatory'". I cannot and will not make a finding of that kind. Insofar as the submission was made in support of Mr La Barrie's case under s 1317S and s 1318 of the Corporations Act, it was incumbent upon him to point to some evidence capable of positively supporting a finding of that kind. That is especially so in circumstances where the bank statements for accounts solely operated by Mr La Barrie show large amounts of money being diverted to accounts held by him personally or by family trusts in which he has a personal interest.
For similar reasons, the submission that the Court should find there to have been no loss or damage "as yet" arising from the contraventions must also be rejected. The records of the Company are so poor that it is not possible to discern its actual financial position. What is known is that the other directors could not independently provide ASIC with information about the conduct of a business for the exploitation of intellectual property, indeed they were ignorant of the entire corporate structure. What they knew about the disposition of investors' funds was told to them (or not as the case may be) by Mr La Barrie.
It was further submitted that the Company was "still attempting to operate, and still intending to generate the returns on investment its shareholders sought when they invested and still hope to achieve". Again, that is a bare assertion. The picture painted by the documentary evidence is too murky for any such finding to be made. It may reasonably be inferred that the "returns on investment" the shareholders sought were those forecast in the pitch decks. There is no evidence to support a conclusion that there was any reasonable basis in fact for those forecasts to have been made.
In addition, I find that Mr La Barrie has a disdainful attitude toward those investors who have complained about the ongoing failure to provide information about the status of their investment. His conduct in procuring terms with one shareholder requiring (as a condition of his exit) that he withdraw a query he had lodged with ASIC and that he cease communicating with other shareholders is especially revealing of Mr La Barrie's contemptuous attitude toward the need to comply with the law.
As to the submission that Mr La Barrie has shown remorse and embarrassment by consenting to disqualification orders, his consent to that remedy will be taken into account when deciding the appropriate remedial response as a whole. For present purposes it is sufficient to observe that Mr La Barrie has for the most part remained defiant throughout this proceeding. Until the eleventh hour, he persisted with submissions that the proceeding has no utility, going so far as to assert that ASIC and its officers were acting in bad faith. A similar theme runs through the text of the so-called "petition". I am not satisfied that Mr La Barrie's belated consent to the disqualification order is an indication of him having a sudden epiphany about the need to comply with the law.
The suggestion that the shareholders are "mom and pop" investors having any kind of affinity with Mr La Barrie also has no proper foundation in the evidence. There is no reliable evidence that the shareholders are comfortable with their investments other than the bare assertions of Mr La Barrie himself. It has not been shown that the persons named in the "petition" are aware of the true financial position of the Company and the risks attending their investments. To describe them as "mom and pop" investors only serves to highlight their vulnerability.
In summary on this issue, the evidence discloses a disgraceful course of conduct on the part of Mr La Barrie, accompanied and explained by his defiant attitude to the law. There is no conceivable basis upon which to relieve him from liability under s 1317S or s 1318 of the Corporations Act.

[207]

As the High Court emphasised in Pattinson, some of those matters relate to the character of the contravening conduct, whilst others relate to the character of the contravener. The plurality also emphasised that the list of relevant factors is not rigid and is not to be utilised as if it were a legal checklist (at [19]). It remains the Court's task to identify the appropriate penalty having regard to the particular facts and circumstances of the case.
In performing that task, the Court must ensure that the "final, total or aggregate, penalty is not unjust or out of proportion to the circumstances of the case": Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383, Stone and Buchannan JJ (at [42]). The so-called totality principle "looks at all factors going to penalty (not just the course of conduct) to determine whether the total overall penalty is appropriate": Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698, Beach J (at [8]).
Concepts of proportionality do not apply in the civil remedy regime established under the Corporations Act, at least not in the same sense as they would apply in a criminal law punitive context. However, as I explained in Director of the Fair Work Building Industry Inspectorate v Robinson [2016] FCA 525; (2016) 241 FCR 338 in the context of the civil remedy regime established by the Fair Work Act 2009 (Cth) (and equally applicable here):
1. Proportionality is nonetheless a critical objective in exercising the discretion conferred by s 546 of the FW Act. That is because the degree of seriousness of a contravention is relevant to ascertain 'the assessment of a penalty of appropriate deterrent value': CSR at [42]. A penalty of appropriate deterrent value is one that recognises that the maximum penalties prescribed in the statute are appropriately imposed in cases where the need for deterrence is the most pronounced. There remains, in addition, a discretion not to impose a penalty at all if the statutory purpose of deterrence would not be served by the imposition of one.
2. The seriousness of the conduct constituting the contravention is an important indicator of the need for deterrence in a particular case, but is not the sole indicator. Consistent with the reasoning of French J (as he then was) in CSR, in all cases it is proportionality in relation to the need for deterrence that must be achieved, having regard to all relevant circumstances, including the objective seriousness of the contravention before the Court.
3. It should also be recognised that penalties fixed for a deterrent purpose are intended to have an attitudinal effect: dissuasion. It is for this reason that my assessment of the seriousness of the conduct of the respondents places appropriate emphasis on the mental attitudes accompanying their physical acts.
In addition, in a case involving multiple contraventions (such as the present), the Court may have regard to the interrelationship between the legal and factual elements of the contraventions so as to ascertain whether they form a part of a course of conduct. As Middleton and Gordon JJ explained in Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 269 ALR 1:
1. As the passages in Williams explain, a 'course of conduct' or the 'one transaction principle' is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is 'the same criminality' and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions.

[213]

To the extent that Mr La Barrie's submissions relevant to mitigating the penalty repeated those made in support of the application to be relieved from liability altogether, they are rejected for reasons I have already made plain.
On the material before me I am not satisfied that the imposition of the $2 million penalty on Mr La Barrie personally would have the effect on the Company (and hence on its shareholders) as alleged by him. That submission proceeds from an assumption that Mr La Barrie would be entitled to draw on the Company's resources to fund his personal liability to pay a penalty imposed upon him by his own wrongdoing. It is an extraordinary submission for a company director to make, particularly a director who purports to have the best interest of the Company's shareholders at heart. In light of the submission, the Court will invite further submissions as to whether there should be an order of the permissible kind discussed by the High Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157, Keane, Nettle, Gordon JJ (at [118] - [120]) so as to ensure that the purpose of the penalty imposed personally against Mr La Barrie may be achieved without detriment to the Company and its shareholders.
I accept that the imposition of a $2 million penalty would have significant financial impact on most individuals. However, it does not follow that a penalty fixed in that amount has a punitive purpose. The difficulty in the present case is that Mr La Barrie has adduced no evidence as to his current financial situation. To the extent that it is submitted that the penalty would be so personally ruinous as to no longer serve a deterrent purpose, it was incumbent upon him to support the submission by adducing cogent evidence of his financial position and asserted inability to pay.
I have mentioned ASIC's submission that Mr La Barrie continued to engage in contravening conduct in breach of his Undertaking, specifically by raising money by way of loans, which meet the description of securities. Whilst that is correct, ASIC did not assist the Court to find that Mr La Barrie must be taken to have known that the raising of money by way of loans would itself amount to a breach of the Undertaking. In their examinations Mr La Barrie and Mr Hafer referred to the need to raise funds by way of loans because the Company could not issue shares without a compliant disclosure document. The proposition that raising loans amounted to a breach of the Undertaking was not put to them in the examinations (at least not so far as is evidenced on the transcript portions admitted in this proceeding). For the purpose of assessing remedies I will not proceed on the basis that the contraventions involving the raising of money in the nature of debt (rather than equity) were knowing contraventions. In addition, I do not consider ASIC's submissions on relating to the asserted breach of the Undertaking to be sufficiently specific in attributing conduct and states of mind to each particular defendant and otherwise too general to support a conclusion as serious as a breach of an undertaking having statutory consequences: Corporations Act, s 93AA. In concluding that $2 million is an appropriate penalty I have not included any finding to the effect that the Undertaking was breached. To be clear, I have left the question of breach undecided and remain satisfied that the penalties to be imposed are appropriate without taking that subject matter into account.
In addition, ASIC submits that there is a basis to find that Mr La Barrie (and Mr Hafer) has continued to engage in contravening conduct after interlocutory injunctions were granted in this proceeding restraining that conduct. For present purposes I consider it neither necessary nor appropriate to express a view in relation to that submission. To the extent that there has been a breach of the Court's orders, the allegation may be the subject of contempt proceedings resulting in criminal sanction including imprisonment: see for example Tax Practitioners Board v Williams [2023] FCA 63. Allegations of breach of the Court's orders should be the subject of a separate and discrete proceeding having regard to the rights that may be asserted by Mr La Barrie if the issue is to be pursued.
I afford some weight to the circumstance that Mr La Barrie admitted the contraventions. Had the admissions not been made, the penalty imposed would have been 10% higher. The discount is small, and deliberately so. The admission of contravention came at the eleventh hour. Moreover, it was coupled with an entirely unmeritorious claim that s 1317S and s 1318 should apply. In addition, Mr La Barrie complained that ASIC had acted improperly in pursuing him and the Company. The late admission meant that ASIC was not spared the inconvenience and expense of preparing for a trial on all of the issues against him, notwithstanding that admissions had been made by the Company and Mr Hafer. That included the inconvenience and expense of anticipating the exemptions that might apply, persisting until Mr La Barrie eventually admitted (in the course of the trial) that none of them did. Until just prior to the trial, Mr La Barrie had signalled his intention to call witnesses, and yet he did not do so. The admissions are relevant, however the case is one in which the making of the offers, the need for a disclosure document and the absence of a compliant disclosure document were all matters that could not on any reasonable view be seriously contested on the facts.
In addition, to the extent that the late admission is relied upon as evidence of Mr La Barrie suddenly gaining insight into the importance of complying with the law, they do little to assist him. That is because Mr La Barrie has sought to rely on a so-called "petition" and in doing so has lent his support to statements contained in that document critical of ASIC for bringing this proceeding.
In addition, I take into account the circumstance that Mr La Barrie was a director of the Company in the financial years to which the criminal proceedings in the Adelaide Magistrates Court related. That conviction against the Company was not a sufficient lesson in the importance of the need to comply with the requirements of the Corporations Act.
I find that Mr La Barrie has a reckless attitude when it comes to the provision of information to shareholders of the Company and that the contraventions in the present case are a manifestation of that attitude. His disregard for the law is not likely to change unless penalties of a significant magnitude are imposed against him personally. Given the very significant need for a personal deterrence, the penalty sought by ASIC is appropriate and will be imposed, albeit via a different course of reasoning to that urged upon the Court by ASIC.
The penalty is also justified having regard to the need for general deterrence, especially given the pivotal role of s 727 of the Corporations Act in the scheme established under Ch 6D outlined earlier in these reasons. There is an obvious need to deter future contraveners from the temptation of engaging in like conduct should they consider the benefits of that course to be worth the risk of personal financial sanction.

[221]

The appreciable risk of future contraventions by Mr La Barrie justifies a permanent injunction. The risk arises not only because of his belligerent state of mind, but also because there is some evidence that he intends to continue to cause the Company to raise money in the nature of equity (as disclosed in the intellectual property valuation report) in circumstances where there is no evidence that he is at all concerned to cause an audit of the Company's financial statements. It is appropriate that he be made to reflect on the consequences of criminal sanction (including imprisonment) should he be tempted to engage in any conduct in breach of the Court's orders in any future capacity whether in connection with the Company or any other corporate entity.
The injunction sought on the Amended Originating Process is in a form restraining Mr La Barrie from doing acts in contravention of s 727 of the Corporations Act and is limited in its operation to the affairs of the Company "or in any Australian company which purports directly or indirectly to be engaged in the commercialisation of information technology". The proposed period of the injunction is 12 years. I am satisfied that is an appropriate form of restraint, and that the period of the restraint is justified in all of the circumstances disclosed in these reasons.
To facilitate supervision of Mr La Barrie's compliance with the injunction, ASIC seeks a further order mandating that Mr La Barrie, during the restraint period provide ASIC (within 48 hours of a written request) evidence sufficient to demonstrate that any monies accepted or solicited during the restraint period in relation to a relevant entity was not received in respect of a restrained order. That order takes the form of a mandatory injunction and is otherwise ancillary to the 12 year restraint. Whilst I am satisfied there is some utility in the order, I consider it necessary to qualify the restraint so as to make it clear that it is subject to any claim of privilege against self-incrimination or exposure to penalty that Mr La Barrie may make.

[230]

The facts I have found in disposing of the case against Mr La Barrie will be taken into account for the purposes of Mr Hafer's case, so far as they are relevant. I add the following.
Mr Hafer readily and repeatedly responded to Mr La Barrie's ongoing requests to secure funds from existing or new investors. It was his practice to meet with prospective investors in face-to-face meetings. In most cases he handed them an application form, and in some cases emailed the application form to them or caused it to be emailed by another person. Mr Hafer then forwarded the completed application form in each case to Mr La Barrie for his approval. Mr Hafer was typically paid a commission based on 10% of the funds he raised. The total commission earned by Mr Hafer referable to the contravening offers was $137,975.00.
Distribution of the application forms was the only means by which Mr Hafer provided prospective investors with the details for the CBA Account into which investors' money was deposited. Mr Hafer's commission payments were transferred to him from that account by Mr La Barrie. Despite his status as a director, Mr Hafer otherwise exercised no oversight of the use of the investors' money deposited into the CBA Account.
The information Mr Hafer provided to the investors took the form of the pitch decks, together with information he conveyed to them orally. Mr Hafer had no input into the content of the pitch decks. The information he provided to the investors was sourced entirely from Mr La Barrie. He has not suggested that he took any steps to verify its objective truth.
Against that general background (including findings I have made earlier in these reasons), I address each of the factual matters relied upon by Mr Hafer in support of his claim to be relieved from liability.
Mr Hafer's assertion that he was "clearly ignorant" of the requirements of the Corporations Act before he received legal advice is not supported by the evidence. Like Mr La Barrie, upon receiving the legal advice, Mr Hafer made a conscious choice to continue to contravene s 727 of the Corporations Act. I infer that he would have engaged in the contravening conduct even if the legal advice had been received at an earlier time. His conduct in ignoring legal advice is indicative of an indifferent attitude to the law.
Mr Hafer's assertion that he continued to contravene s 727 of the Corporations Act after receiving the advice because "without money the company could not continue to operate and could not develop its IP" also lacks any reliable evidentiary foundation. The content of Mr Hafer's s 19 examination makes it plain that at the time of the examination the only source of information he had about the activities of the Company (or any other person or entity drawing on its funds) was Mr La Barrie.
I accept that Mr Hafer did not have factual access to records of the Company so as to enable him to have any meaningful control or oversight over its financial position. But that is hardly a matter weighing in his favour. He was not a hapless employee of the Company subject to the direction and control of Mr La Barrie. He was one of three directors comprising the Company's Board. He and Mr Fry were together in a position to pass resolutions by a majority vote of that Board. There is no evidence that he ever proposed any resolution so as to bring himself and Mr Fry into possession of documents and verifiable information, even if over Mr La Barrie's objection. The evidence does not support a finding that he has done anything at all to regularise the so-called "loan", to clarify the terms and conditions on which it will be repaid, or to confirm and assert the rights of the Company vis a vis individuals or entities that have dissipated its funds.
Mr Hafer's submission to the Court that he knowingly contravened the Corporations Act so as to give investors some chance to make a return is highly concerning and I reject it for several further reasons.
Mr Hafer did not give evidence. His factual submissions on that topic amount to bare assertions. An obvious difficulty with the assertion is that Mr Hafer has no evidentiary basis for the claim that the Company in which investors subscribed was in the business of developing intellectual property. On the basis of the evidence before me, I find that the only activity of the Company was the procurement of money from investors and the release of that money into the hands of Mr La Barrie and entities associated with him under an undocumented and unsupervised arrangement about which the other two directors knew very little.
In his examination, Mr Hafer said it was his understanding that the intellectual property was owned by the Singapore Company in any event. I consider him to have insufficient knowledge about the legal relationships between the relevant entities or the terms and conditions of any "loan" agreement or any other legal relationships to support any views he might express about the likelihood of shareholders receiving any return on their investment, whether in the short or long term. If the "business" of the Company involved the carrying on of a business for the development and commercialisation of intellectual property through "subsidiaries", there is no reliable evidence about the financial position of the group to support a finding of the kind asserted.
In any event, s 727 of the Corporations Act did not operate so as to prevent the Company from raising further capital. Rather, it prevented the raising of further capital in circumstances where no compliant disclosure document had been lodged with ASIC and no disclosure document accompanied application forms. Mr Hafer had a choice to cease distributing application forms for so long as there was no accompanying compliant disclosure document. The inference that arises is that Mr Hafer chose instead to continue to breach the Corporations Act because he personally benefited from attracting yet more investment by his receipt of a commission, and I so find.
It is not to the point that Mr Hafer "attempted" to engage auditors for the Company. Those attempts mean nothing in circumstances where he knowingly committed contraventions of s 727 of the Corporations Act in circumstances where he knew that no audited financial statements existed.
To the extent that Mr Hafer took some steps to improve the Company's corporate governance following his appointment as a director, those steps are taken into consideration.
In his examination, Mr Hafer said:

[238]

As against Mr Hafer, ASIC seeks the imposition of a penalty in the amount of $600,000.00. I have concluded that penalty is not a sufficient reflection of the seriousness of Mr Hafer's conduct and that a penalty of $800,000.00 should be imposed.
The cumulative maximum penalty for the 101 contraventions committed by Mr Hafer is calculated in the same manner discussed earlier in these reasons. On the assumption that the commission he received is a "benefit" for the purposes of s 1317G(4) of the Corporations Act, triple the commission amount ($413,925.00) is not greater than the monetary value of 5,000 penalty units per contravention ($109,170,000.00). The total maximum penalty is the latter sum.
The appropriate penalty will be determined on the basis that the contraventions formed a part of a course of conduct. As I have already emphasised, adopting that approach does not reduce the maximum penalty to that applicable to a single contravention, but it does explain why the penalty arrived at is a small fraction of the total maximum.
Mr Hafer joined in the submission that the penalties sought by ASIC were punitive. That submission is rejected for reasons I have already given in connection with Mr La Barrie.
To the extent that it was submitted that the penalty sought by ASIC would work such a hardship upon Mr Hafer so as to lose its specific deterrent effect, that submission has no foundation in the evidence, Mr Hafer having adduced no evidence of his personal financial position. There is no evidentiary basis for a finding that he does not have the capacity to pay.
I afford Mr Hafer credit for the admissions he made at the outset of the proceeding to the collective effect that the elements of the alleged contravention were fulfilled. That admission would have led to the trial of this action and the question of penalties being determined at a much earlier time, a course not possible because of Mr La Barrie's conduct in the proceeding.
Were it not for Mr Hafer's early admission I would have imposed a penalty in an amount 15% higher than that sought by ASIC. However, I do not consider the admission of itself sufficient to support a finding that Mr Hafer has had a recent change of attitude as to the importance of complying with the law. I am reinforced in that view by the facts asserted by Mr Hafer revealing his distorted view as to the interests of shareholders. In addition, Mr Hafer (like Mr La Barrie) invited the Court to find that the "petition" evidenced the existence of some shareholders who were content with the management of the Company and disgruntled by ASIC's conduct in bringing this proceeding. I will make no such finding as explained elsewhere in these reasons.
There is an obvious need for specific deterrence in Mr Hafer's case, notwithstanding his stated intention not to act as a company director in the future.
In addition, there is a significant need to deter others who may be minded to engage in like conduct, especially given the pivotal role of s 727 of the Corporations Act in achieving the protective purposes of Ch 6D of the Corporations Act.
The parties should be heard as to why the Court should not make an order restraining Mr Hafer from paying the penalty from the resources of the Company, given that he joined in a submission that a penalty against him would affect the shareholders' interests.

[247]

Based on the existence of 49 contravening offers between 17 September 2019 and 30 June 2020 and 52 contravening offers between 1 July 2020 and 10 February 2020, the monetary value of 50,000 penalty units applied to the 101 contraventions is $1,091,700,000.00 (50,000 x 49 x 210 + 50,000 x 52 x 222).
ASIC submitted that the benefit derived from the contraventions equates to the capital raised by reason of the contravening offers. When tripled, that amounts to $4,139,250.00. It is not possible to determine the Company's turnover for the purposes of calculating a maximum penalty under s 1317G(4)(c). However, it is reasonable to infer that the amount that would be arrived at by the annual turnover method would not exceed the total monetary amount of 50,000 penalty units for each of the 101 contraventions. I therefore proceed on the basis that the total maximum penalty for the contraventions is $1,091,700,000.00.
ASIC seeks pecuniary penalties amounting to $4.1 million against the Company. That is a fraction of the statutory maximum.
As in the case of Mr La Barrie and Mr Hafer, I proceed on the basis that the 101 contraventions constituted a course of conduct.
To the extent that the Company otherwise relied on the same arguments as Mr La Barrie and Mr Hafer in mitigation of penalty, those argument are rejected for the same reasons given in respect of the individuals.
A discrete argument advanced on behalf of the Company concerned the financial impact the imposition of any penalty might have. It was submitted that the Company was in the "latter stages of commercialisation of software developed to enable consumers and retail businesses to engage with each other over an 'online to off-line' or '020' platform (O4Sale software)". I have already concluded that there is insufficient evidence to support a finding that the Company was engaged in such activities, or that other entities drawing on its capital will one day make the Company's shareholder rich, as asserted by Mr La Barrie during his examination.
It was further submitted that the Company's ownership structure was "still incomplete" but "it is well-known to and understood by the shareholders". That submission is disconnected from the evidence. It is apparent that the directors could provide little clarity about the legal relationships between the Company and other entities and yet the shareholders have been told (without any apparent foundation) that the Company has "subsidiaries".
It is impossible to gauge the impact that a penalty in the amount sought by ASIC might have upon the Company, given the absence of audited financial statements. That situation is a consequence of the choices made by the Company's directors over many years, as well as the choices made by the Company (through its directors) not to adduce evidence in this proceeding.
The Company's submission that the imposition of the penalty would necessarily be ruinous must be rejected. If a penalty were to be imposed, it would be for those assuming control of the Company to assert any rights it may have against third parties to pursue such causes of action and realise such assets as it may have, so as to ensure that the penalty is paid.
If the statements of Mr La Barrie are to be believed, the Company may be the beneficial owner of shares in a foreign company owning intellectual property worth about $37 million. The submission that the imposition of a penalty might result in the intellectual property being sold may well have some foundation in fact. In all of the circumstances described in these reasons, I am not satisfied that would result in shareholders (being the persons affected by the contraventions) necessarily being in a worse position.
However, I do accept that the imposition of a penalty upon the Company itself may well have an adverse effect on the very shareholders affected by the 101 contraventions. That is not because I am persuaded that they will lose an existing opportunity to become wealthy because of the commercialisation of any intellectual property that may exist. Rather, it is because the penalty may result in the Company being unable to pay the penalty as and when it falls due and so be wound up in insolvency with no return to shareholders of any of the capital they advanced. That may take the Company out of the control of the shareholders who may collectively decide its future, including the future composition of the Board of directors.
Critically, the need for specific deterrence in the case of the Company is diminished, given that Mr La Barrie and Mr Hafer will not be permitted to participate in the management of the Company and because they each face the spectre of criminal sanction (including possible imprisonment) should they breach the Court's orders. The exclusion from the Company of those wrongdoers significantly reduces the risk of future contraventions by the Company itself.
The removal of Mr La Barrie and Mr Hafer from the Company's management creates a circumstance in which the shareholders (83 of whom are affected by the contraventions forming the subject matter of this proceeding) may exercise their own rights within the corporate structure to replace directors with alternate persons who will comply with the law and take active steps to advance and protect their rights and interests.
As for general deterrence, I consider that objective to be served by the remedies granted against Mr La Barrie and Mr Hafer.
Weighing all of those considerations in the balance I am not satisfied that the imposition of a penalty on the Company would serve a deterrent purpose, being the only purpose for which civil penalties are to be imposed. I consider the prospect of future contraventions of s 727 by the Company itself (unshackled from the control of the two contravening directors) to be very low.
There will, however, be an injunction restraining the Company from further like contraventions of s 727 of the Corporations Act for a period of 12 years so as to reinforce in its replacement controlling minds the importance of complying with the capital raising regime. There will be a further order mandating the provision of information to facilitate supervision of the Company's compliance with the injunction. As a corporate body, the Company does not have a common law right to claim privilege against self-incrimination or exposure to penalty and the order will not be so qualified.