Bain v International Capital Markets Pty Ltd

O'BRYAN J: 1 This proceeding was commenced on 20 December 2023. It is a representative proceeding brought under Part IVA of the Federal Court of Australia Act 1976 (Cth). The group members are persons who, as retail clients within the meaning of s 761G of the Corporations Act 2001 (Cth) (Corporations Act), acquired one or more "contracts for difference" (CFDs) from the first respondent, International Capital Markets Pty Ltd (ICM), on ICM's trading platform in the period between 20 December 2017 and 28 March 2021 and suffered loss or damage as a result. 2 The applicant alleges that, in connection with offering and issuing CFDs, ICM: (a) contravened the prohibitions against false, misleading or deceptive conduct in ss 1041H and 1041E of the Corporations Act and ss 12DA and 12DF of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act); (b) contravened the prohibitions against unconscionable conduct in s 12CB of the ASIC Act and s 991A of the Corporations Act; (c) breached its duty of care to retail clients to warn them of the material risks inherent in the highly leveraged CFDs issued by ICM; and (d) made negligent misstatements on which the applicant and group members relied. 3 The applicant also alleges that the second respondent, Andrew Budzinski, is liable as an accessory to ICM's breaches of laws and duties. 4 The applicant has served the proceedings on ICM but to date has been unable to serve Mr Budzinski personally because he resides outside Australia. 5 Service of an originating process outside of Australia requires the authority of a statute or the rules of court made pursuant to statute: John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at [13] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). Service of process outside Australia is governed by Division 10.4 of the Federal Court Rules 2011 (Cth) (Federal Court Rules), which was substantially amended with effect from 13 January 2023. As observed by Moshinsky J in The Noco Company v Hong Kong Haowei Technology Co Ltd [2023] FCA 533 at [9], the main change was to remove the requirement for leave before service of an originating application outside of Australia in the categories of cases set out in r 10.42. This proceeding falls within a number of those categories and, accordingly, leave to serve the originating application on Mr Budzinski outside Australia is not required. 6 By interlocutory application dated 15 March 2024, the applicant seeks, in the alternative: (a) an order that Mr Budzinski is taken to have been served with the originating application, statement of claim and genuine steps statement in accordance with r 10.48 of the Federal Court Rules, by means of the service of those documents on ICM on 22 December 2024; or (b) an order pursuant to r 10.49(a) of the Federal Court Rules that the applicant serve the originating application, statement of claim and genuine steps statement on Mr Budzinski by means of: (i) emailing them to the email address budzinski.a@gmail.com; and (ii) posting them to the address Boulevard Apartment 5901, Downtown Dubai, Dubai, United Arab Emirates. 7 The interlocutory application was supported by an affidavit of Mathew Glen Chuk affirmed 15 March 2024. Mr Chuk is a legal practitioner and director in the firm Echo Law Pty Ltd, an incorporated legal practice who are the solicitors for the applicant. In his affidavit, Mr Chuk deposes to the following matters: (a) ICM was incorporated on 2 January 2007. Mr Budzinski has been a director of ICM since the date of incorporation. Currently, ICM has two directors, the other director being Xu Lu who was appointed on 1 October 2019. ICM has no company secretary. Until 1 February 2024, Mr Budzinski's residential address was stated in the ASIC register as an address in Cyprus. As discussed below, On 1 February 2024 Xu Lu filed a "Change of company details" form with ASIC which stated that Mr Budzinski's residential address had changed to Address Boulevard Apartment 5902, Downtown Dubai, Dubai, United Arab Emirates with effect on 13 December 2023. (b) All of the shares in ICM are held by Bud Corporation Pty Ltd. Mr Budzinski is and has always been a director and the sole shareholder of Bud Corporation Pty Ltd. In correspondence with employees of ICM, Mr Budzinski referred to himself as the "owner" of ICM. (c) Media releases and other documents published on the ICM website state that Mr Budzinski was the founder of ICM. Between 2009 and 2015, Mr Budzinski was referred to as ICM's Managing Director and, from 2015 to date, he has been referred to as ICM's CEO. (d) On 22 December 2023, the originating process in this proceeding was served on ICM and an attempt was made to serve Mr Budzinski personally at the offices of ICM, which was unsuccessful. Following this, in December 2023 and January 2024, the applicant took steps to serve Mr Budzinski at his then indicated address on the ASIC register in Cyprus, which is a signatory to the Hague Convention. On 24 January 2024, a Hague Service Request had been reviewed, and was accepted and dispatched to Mr Budzinski via the Ministry of Justice and Public Order of the Cyprus Central Authority. (e) On 1 February 2024 at 5.05 pm, ICM filed a notice of the appointment of their lawyers, Quinn Emanuel. A few hours later, at 8.42 pm, ICM filed with ASIC the change of company details referred to above which notified the change of Mr Budzinski's residential address from Cyprus to Dubai, United Arab Emirates (UAE). UAE is not a signatory to the Hague Convention, nor is there any convention between Australia and UAE with respect to the service of proceedings. (f) The applicant has obtained an opinion from a lawyer admitted in UAE, Faisal Ahmad Ali Al Haddad Al Hazmi. The effect of that opinion is that it is not possible under UAE law to serve proceedings commenced outside UAE on persons in Dubai, as notice serving proceedings must be authorised by a competent Court, case management officer or supervising judge in UAE, and such authorisation will only be given where the proceedings has been commenced locally. Mr Al Hazmi does not know of any examples of foreign proceedings being served on Dubai residents. (g) A proceeding brought against ICM and Mr Budzinski in the Federal Circuit and Family Court of Australia reveals that Mr Budzinski communicates using the email address budzinski.a@gmail.com. 8 The present circumstances are that Mr Budzinski appears to reside in the UAE but the UAE is not a signatory to the Hague Convention, there is no convention between Australia and UAE with respect to the service of proceedings and the applicant has received advice that it is not possible to serve Budzinski under UAE law. In those circumstances, the applicant sought orders for deemed service or substituted service. 9 The applicant has applied for an order of deemed service under r 10.48 of the Federal Court Rules. Under that rule, a party may apply for an order that a document is taken to have been served if: (a) it is not practicable to serve the document on the person outside Australia in accordance with a convention, the Hague Convention or the law of the country in which the person resides; and (b) the party provides evidence that the document has been brought to the attention of the person. 10 The applicant has satisfied me that condition (a) is fulfilled. I am not satisfied, however, that condition (b) is fulfilled. The applicant submitted that the Court can and should infer that the originating process and the statement of claim has been brought to the attention of Mr Budzinski because he is the owner and CEO of ICM and ICM could not sensibly provide instructions to its lawyers, Quinn Emanuel, if Mr Budzinski was not aware of the contents of those documents. There is considerable force in those submissions. However, it is possible that instructions in respect of the proceedings are being given by the other director of ICM, Xu Lu. There is otherwise no direct evidence that the originating process and the statement of claim have been brought to the attention of Mr Budzinski. In the circumstances, I decline to make an order of deemed service. 11 In the alternative, the applicant has applied for orders of substituted service under r 10.49. That rule provides as follows: If service on a person outside Australia, in accordance with a convention, the Hague Convention or the law of a foreign country, was not successful, a party may apply to the Court without notice for an order: (a) substituting another method of service; or (b) specifying that, instead of being served, certain steps be taken to bring the document to the attention of the person; or (c) specifying that the document is taken to have been served: (i) on the happening of a specified event; or (ii) at the end of a specified time. 12 The rule applies where service outside Australia "was not successful". The language of the rule contemplates that an attempt to effect service outside Australia in accordance with a convention, the Hague Convention or the law of the foreign country has been made. That did not occur in this case because service is unable to be effected by any of those methods. Strictly, therefore, the condition in the rule is not satisfied. 13 In circumstances such as the present, the Court will ordinarily make an order for substituted service under r 10.24 which provides as follows: If it is not practicable to serve a document on a person in a way required by these Rules, a party may apply to the Court without notice for an order: (a) substituting another method of service; or (b) specifying that, instead of being served, certain steps be taken to bring the document to the attention of the person; or (c) specifying that the document is taken to have been served: (i) on the happening of a specified event; or (ii) at the end of a specified time. 14 Although r 10.24 does not expressly address service outside of Australia, r 10.45 stipulates that the other provisions of Part 10 of the Federal Court Rules apply to service of a document on a person outside Australia in the same way as the provisions apply to service on a person in Australia, to the extent that the provisions are, amongst other things, relevant and consistent with Division 10.4. I am satisfied that, in the circumstances of this case (as described above), r 10.24 is relevant and consistent with Div 10.4. Rule 10.24 has been relied on in similar cases: see for example Noco. If there were any legal doubt about the applicability of r 10.24, I would in any event dispense with the implicit condition in r 10.49 that service have first been attempted in accordance with a convention, the Hague Convention or the law of the foreign country (pursuant to r 1.34): see Noco at [12]-[17]. 15 I am satisfied that, in the circumstances of this case, it is not practicable to serve documents on Mr Budzinski in the UAE in a way required by the Federal Court Rules. That is because the UAE is not a signatory to the Hague Convention, there is no convention between Australia and UAE with respect to the service of proceedings and the applicant has received advice that it is not possible to serve Budzinski under UAE law. Accordingly, it is necessary and appropriate to make orders for substituted service. 16 The evidence establishes that Mr Budzinski uses the email address budzinski.a@gmail.com and his residential address is Boulevard Apartment 5901, Downtown Dubai, Dubai, United Arab Emirates. I will therefore make an order under r 10.24 that substituted service be effected by sending relevant documents to those addresses. Additionally, I will also order the applicant to send the relevant documents to ICM with a request that ICM forward the documents to Mr Budzinski by any method that ICM ordinarily sends written communications to Mr Budzinski. It is the Court's expectation that a litigant in the position of ICM would comply with such a request, made pursuant to orders of the Court. 17 It is necessary to make a number of other orders associated with the intended service of the originating process on Mr Budzinski. First, the applicant must comply with r 10.43B which stipulates that: If a person is to be served outside Australia with an originating application, the person must also be served with a notice, in accordance with Form 26A, informing the person of: (a) the scope of the jurisdiction of the Court in respect of proceedings against persons who are served outside Australia; and (b) the grounds alleged by the applicant to found jurisdiction; and (c) the person's right to challenge service of the originating application or the jurisdiction of the Court or to file a conditional appearance. 18 Second, a question arises whether r 10.44 requires the applicant to obtain the leave of the Court to serve documents other than the originating application on Mr Budzinski outside Australia. Rule 10.44 states as follows: Any document other than an originating application may be served outside Australia with the leave of the Court, which may be given with any directions that the Court considers appropriate. 19 Arguably, no such leave is required in circumstances where the other documents are served in a proceeding which is commenced by an originating application and where leave is not required to serve the originating application. However, a practice has emerged whereby the Court has granted leave to serve documents other than the originating application. I will make an order to that effect to remove any doubt. 20 I will also make orders determining the time by which the applicant is to effect service, the time by which service will be treated as having been effected, and the time by which Mr Budzinski is required to file a notice of address for service for the purposes of r 10.43C. 21 It is appropriate to reserve the costs of the applicant's interlocutory application. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.