Australian Securities & Investments Commission, in the matter of Money for Living (Aust) Pty Ltd (Administrators Appointed) v Money for Living

REASONS FOR JUDGMENT 1 The Australian Securities and Investments Commission has begun an investigation into the affairs of Money for Living (Aust) Pty Ltd (rec and mgr apptd) (admin apptd) and MFL Property Holdings Pty Ltd (rec and mgr apptd) (admin apptd). The companies were involved in a scheme by which elderly people, mostly pensioners, sold their homes to one of the companies at a substantially discounted price. The price was payable by a lump sum payment or by a lump sum payment with a promise to pay further monthly payments. The vendor was also given a life tenancy in respect of the property sold. 2 The companies used celebrities (actors, sports people and the like) to advertise the scheme. They also issued several brochures explaining the scheme. One of those brochures, by way of example, stated that the companies had "developed a new system that allows people (generally over 55) to access the equity in their home. … The many satisfied customers are now enjoying the little luxuries that come with increased disposable income. Whether it's a holiday, theatre ticket or even a new car." This could not be further from the truth. 3 In short order, the companies collapsed. First, a secured creditor appointed a receiver and manager to each of them. Then the companies themselves appointed administrators to take charge of their affairs. The financial position of the companies is far from clear, but it is likely that their liabilities are in the millions of dollars with insufficient assets to meet the liabilities. 4 In addition, there is a dispute between many of the vendors and the companies regarding the true ownership of the properties that have been sold to the companies. That dispute is the subject of a separate proceeding. That action will determine whether the vendors are entitled to recover their properties. 5 ASIC is investigating whether there have been contraventions of the Corporations Act 2001 (Cth) (for example, ss 180, 181, 182, 184, 206A, 911A and Pt 7.10 of Div 2 of the Act) or the Australian Securities and Investments Commission Act 2001 (Cth) (particularly sub-div C and D, Div 2, Pt 2). The investigation is far from complete. 6 One aspect of ASIC's investigation concerns the conduct of the third defendant, Stephen O'Neill, and his brother, Gary, the fourth defendant. Stephen O'Neill is believed to have established the Money for Living scheme. According to ASIC's investigation to date, Stephen O'Neill is the "alter ego" of Money for Living. It believes this to be so because the evidence it has so far gathered, including statements made by Mr O'Neill during the course of an examination under s 19 of the ASIC Act, shows that he was involved in setting up the two companies, employing staff, determining the content of advertisements and dealing with clients. Gary O'Neill was also involved with the companies. At all material times he was their director. 7 Pursuant to the present application, ASIC seeks an order under s 1323(1) of the Corporations Act restraining the O'Neill brothers from leaving the jurisdiction. Last Friday I made ex parte orders to that effect. Those orders expire today. ASIC seeks to have restraining orders until mid-December 2005. 8 There are several bases for ASIC's application. Each is premised on the proposition that it is either "necessary" or "desirable" (to use the statutory language) for the orders to be made. The way ASIC puts its case is as follows. First, there is the complex nature of the facts underlying its investigation. The case is unusually complicated as it involves many properties and a number of claims which have been made in respect of them. ASIC describes the Money for Living scheme as "sophisticated" and it seems to be tolerably clear (at least at this early stage) that pensioners and retirees have been misled in many respects. 9 Second (and perhaps this basis is not now pressed), ASIC say that it is "necessary" or "desirable" for the orders to be made by reason of the proceeding which has been commenced against, among others, the O'Neill brothers. In this respect it refers to Australian Securities and Investments Commission v Troy (1999) 33 ACSR 121, 123. There Muir J said that in circumstances where civil proceeding are brought against a defendant for breach of the Corporations Act or ASIC Act, with the possibility of the recovery of substantial sums of money, including fines or penalties, there are obviously greater prospects of recovery of those monies if the defendant remains in the jurisdiction. 10 Third, ASIC says that there is a risk that unless the order is made, the O'Neill brothers will flee the jurisdiction especially in light of the possibility that they may be charged with a number of offences. On this aspect ASIC notes that neither of the O'Neill brothers is an Australian citizen. Each holds British citizenship. It then points out that Stephen O'Neill is in the process of selling his assets (a property at Cranbourne and a luxury motor vehicle). It may be, as Mr O'Neill's lawyer says, that these assets are being sold to enable Mr O'Neill to cover his legal costs. On the other hand there may be a more insidious reason for their sale. 11 ASIC also relies on the fact that Stephen O'Neill was recently released from prison, having served a four year term of imprisonment for contraventions of the Corporations Law (improper use of position as a director) and breaches of the Crimes Act 1914 (Cth) (theft and using false documents) arising from his conduct as a director of another company. It says that this suggests that there may be a serious risk of flight. 12 Finally, ASIC points to the fact that one of the orders I made on Friday last required each of the O'Neill brothers to forthwith deliver up their passports to ASIC. Those orders were made on the basis of oral evidence from an Acting Commander of the Victorian Police that an unidentified informant had notified him that the O'Neill brothers intended to leave Australia during the Melbourne Cup Carnival. Although each of the brothers was served with or at least made aware of my order, Stephen O'Neill did not deliver his passport as required. It is possible that this failure to comply with my order can be attributed to a mistaken belief that as the order had not personally been served on him (in the sense that the order had not been handed to him), he was not obliged to comply with it. The other possibility is that he was evading service of the order (which the evidence suggests is a likely possibility) and has no intention of handing over his passport. 13 The case against Gary O'Neill on several aspects is less strong than that against his brother. Gary O'Neill has not in the past been convicted of any criminal offences. He has not flouted the order requiring him to deliver up his passport. I note, however, that the passport he delivered to ASIC had recently expired. Gary O'Neill candidly admits that he wishes to travel to England for a short visit. If he does not renew his passport then, while he may be able to return to England, he will not be able to return to Australia. 14 The cases instruct me that I should only make an order restraining a person from leaving the jurisdiction in a clear case. I am in no doubt that this is such a case. 15 There is every indication that the people who dealt with the two companies have been imposed upon. Prima facie at least it seems that there have been various breaches by the O'Neill brothers of both the Corporations Act and the ASIC Act. Plainly the matter requires full investigation. I propose to give to ASIC the time it seeks to complete its investigation. Further, if charges are to be laid then the O'Neill brothers should be required to remain within the jurisdiction to face those charges. 16 As ASIC seeks only until 16 December 2005 for the restraining order to remain in operation, I propose to make an order to that effect. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.