CTHFCAFC
Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission
[2022] FCAFC 170
Federal Court of Australia (Full Court)|2022-10-10|Before: Cheeseman JJ
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Source factsCourt
Federal Court of Australia (Full Court)
Decision date
2022-10-10
Before
Cheeseman JJ
Source
Original judgment source is linked above.
Judgment (27 paragraphs)
[1]
- BACKGROUND TO THE APPEAL 1 These reasons for judgment relate to the second appeal arising from judgments below concerning investment schemes involving a company formerly known as Mayfair Wealth Partners Pty Ltd and now known as Australian Income Solutions Pty Ltd (to be referred to in these reasons by its trading name during the relevant period, Mayfair Platinum), and other companies M101 Holdings Pty Ltd, M101 Nominees Pty Ltd, and Online Investments Pty Ltd trading as Mayfair 101 (Mayfair 101). 2 The investment schemes involved the issue of promissory notes. M101 Holdings was the issuer of the "M+ Fixed Income Notes" (M+ Notes). M101 Nominees was the issuer of the "M Core Fixed Income Notes" (Core Notes). Mayfair 101 marketed the M+ Notes and the Core Notes (together, the Mayfair products). James Mawhinney was the sole director of each of the companies. 3 The reasons for judgment concerning the first appeal were published as Mawhinney v Australian Securities and Investments Commission [2022] FCAFC 159 (the Mawhinney judgment). Although the two appeals were heard together, they involve appeals from different judgments and distinct issues. 4 These reasons for judgment concern the orders the primary judge made consequential on Australian Securities and Investments Commission v Mayfair Wealth Partners Pty Ltd (No 2) [2021] FCA 247 (J1, also the liability judgment) and Australian Securities and Investments Commission v Mayfair Wealth Partners Pty Ltd [2021] FCA 1630 (J2, also the penalty judgment). 5 The Mayfair parties (the defendants below, the appellants and second respondent in the appeal) did not appear at the hearing leading to J1. Consequential on J1, the primary judge made declarations as sought by the Australian Securities and Investments Commission (ASIC) to the effect that, in contravention of s 1041H(1) of the Corporations Act 2001 (Cth) (the Corporations Act) and ss 12DA(1), 12DB(1)(a) and 12DB(1)(e) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) the Mayfair parties (or a number of them) represented to consumers that: (1) the Mayfair products were comparable to, and of similar risk profile to, bank term deposits (the Bank Term Deposit Representations), when the Mayfair products expose investors to significantly higher risk than bank term deposits in various specified ways; (2) on maturity of the Mayfair products, the principal would be repaid in full (Repayment Representations), when investors in the Mayfair products might not receive capital repayments at maturity because the defendants had the contractual right to elect to extend the time for repayment to investors for an indefinite period of time, including where the defendants did not have sufficient funds to repay investments at maturity, which right the defendants have in fact exercised; (3) the Mayfair products were specifically designed for investors seeking certainty and confidence in their investments and therefore carried no risk of default (No Risk of Default Representations), when there was a risk that investors could lose some or all of their principal investment; and (4) the Core Notes were fully secured financial products (Security Representations), when funds invested in Core Notes were: (a) lent to Eleuthera Group Pty Ltd and not secured by first-ranking, unencumbered asset security or on a dollar-for-dollar basis or at all, (b) used to pay deposits on properties prior to any security interest being registered, and (c) used to purchase assets that were not secured by first-ranking, unencumbered asset security. 6 The Mayfair parties appeared at the hearing leading to J2. Consequential on J2, the primary judge made orders on 21 January 2022 to the effect that: (1) Mayfair Platinum pay a pecuniary penalty of $10,000,000 in respect of its contraventions of s 12DB of the ASIC Act; (2) M101 Holdings pay a pecuniary penalty of $8,000,000 in respect of its contraventions of s 12DB of the ASIC Act; (3) M101 Nominees pay a pecuniary penalty of $8,000,000 in respect of its contraventions of s 12DB of the ASIC Act, such penalty not to be enforced under s 553B(1) of the Corporations Act; (4) Mayfair 101 pay a pecuniary penalty of $4,000,000 in respect of its contraventions of s 12DB of the ASIC Act; (5) adverse publicity notices be published; and (6) Mayfair Platinum, M101 Holdings, and Mayfair 101 be restrained from using certain specified phrases in any advertising, marketing or promotion. 7 The appellants (three of the defendants below), Mayfair Platinum, M101 Holdings and Mayfair 101, contend in this appeal that the primary judge erred on the basis of 36 grounds. The other defendant below, M101 Nominees, is now in liquidation and is the second respondent to the appeal. For convenience, the four defendant companies below are referred to as the appellants (or the Mayfair parties) except where it is necessary to distinguish between them. 8 The appeal proceeded on the basis of an Amended Notice of Appeal handed up in Court on the first day of the appeal hearing, a course which was not opposed by ASIC. 9 In common with our observations about the extensive grounds of appeal in the Mawhinney judgment, the numerous grounds raised in this appeal lack discrimination. They also fail to recognise the consequences of the forensic decision Mr Mawhinney made on behalf of the defendant companies below not to appear at the hearing leading to J1 and the importance of the principle of finality of litigation, one aspect of which is that a party is generally bound by its conduct below: Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491 at 497- 498, University of Wollongong v Metwally [No 2] [1985] HCA 28; (1985) 60 ALR 68 at 71. As explained below, having not appeared at the hearing which led to J1, it is not apparent how the appellants can establish that the primary judge erred in not making findings or drawing conclusions in J1 which were never put to the primary judge. The fundamental issues which the appellants never confront are that it is not an error to admit evidence to which no objection is taken (subject to a few exceptions where the evidence is prohibited from admission, which is not the case here). It is not an error to make reasonably open findings of fact when no-one argues the finding should not be made based on other potentially contradictory but contestable evidence. It is not an error to not weigh potentially competing characterisations of facts when no argument is made about the characterisation. 10 During the course of the hearing of the appeal these issues were raised with the appellants and, in that context, the appellants were asked why they had not applied to set aside the declarations consequential on J1 under r 39.05(a) of the Federal Court Rules 2011 (Cth) (the Federal Court Rules). Rule 39.05(a) provides that the Court may vary or set aside a judgment or order after it has been entered if "it was made in the absence of a party". The appellants' response was that the forensic decision had been made that an application under the rule was not available. It should also be noted that r 30.21 is to the same effect. It provides that if a trial proceeds in a party's absence and during or at the conclusion of the trial an order is made, the party who was absent may apply to the Court for an order setting aside or varying the order and for the further conduct of the proceeding. The appellants made a forensic decision not to take these options. 11 It is difficult to escape the impression that Mr Mawhinney chose for the appellants not to apply to set aside the declarations made in their absence because that power is discretionary and it would have appeared unlikely that the Court would exercise a discretion in favour of the appellants when the most probable inference would have been that Mr Mawhinney decided they would be better served by not appearing at the liability hearing (see Polis v Zombor (No 5) [2022] FCA 122 at [43]-[44]). This reality, however, also exposes the problem on the appeal. An appeal to put arguments that could and should have been put to the primary judge, but which were not put due to a forensic decision seen to be to the advantage of the party at the time in not appearing at the hearing, cannot be used as a means to escape the principle of finality by attributing errors of the kind identified (that is, admitting evidence to which no objection is taken, making reasonably open findings of fact when no-one argues the finding should not be made based on other potentially contradictory but contestable evidence and not weighing potentially competing characterisations of facts when no argument is made about the characterisation). 12 The equivalent provision to r 30.21(1)(b)(i) in the Uniform Civil Procedure Rules 2005 (NSW) (r 29.7) has been explained in these terms in In the matter of Anton Fabrications (NSW) Pty Ltd - Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186; (2011) 248 FLR 384 at [11]: Turning then to the issue as to whether the application should be heard in the absence of Anton Fabrications, Rule 29.7 of the Uniform Civil Procedure Rules 2005 (NSW) applies when a trial is called on and any party is absent. In those circumstances the Court may proceed with the trial generally, so far as concerns any claim for relief in the proceedings, or may adjourn the trial. If it is the defendant who fails to appear, then the plaintiff may prove its claim so far as the burden of proof lies upon it and if it proves its claim is entitled to the relief claimed and such other relief as is consistent therewith (see discussion in Ritchie's Uniform Civil Procedure (NSW), referring to Stone v Smith (1887) 35 Ch D 188 and Kingdon v Kirk (1887) 37 Ch D 141). 13 This is consistent with the reasoning of the High Court in Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279. By analogy in the present case, the appellants had not withdrawn their Response to ASIC's Amended Concise Statement. Accordingly, it could not be taken by their failure to appear that they did not rely on their Response to ASIC's Amended Concise Statement. ASIC therefore had to prove its entitlement to the claimed relief. However, the appellants remained (and remain) bound by their conduct in not objecting to evidence or making arguments about the weight that ought to be given to evidence. They could apply to set aside the declarations made in their absence. But they cannot assert error by the primary judge merely because their absence made it easier for ASIC to adduce evidence and prove its case. 14 This is not to say that no appeal may be brought against orders made in the absence of a party, even a party which has made a forensic decision not to appear at the hearing. Rather, the focus of these observations is that the need for adherence to the principle of finality is acute in respect of those appeal grounds which concern the primary judge's alleged errors in admitting evidence or making factual findings based on the evidence below. It is not apparent how it can be said that the primary judge committed any error in this regard when the admissibility of the evidence and the weight which should be given to it was contestable and the appellants could and should have put their arguments as to both below. 15 Further, and relatedly, there is good reason for rr 39.05(a) and 30.21(1)(b)(i) to involve a discretionary decision, subject to appellate review only for an error of principle in the exercise of discretion in accordance with House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505-506. A party that has chosen not to appear can seek to have orders made against them in their absence set aside. But it is not apparent how such a party can succeed in alleging error by a primary judge on the basis of evidentiary issues which could and should have been tested below (in contrast, for example, to legal issues not depending on evidence open to different characterisation). To conclude that a primary judge has erred in those circumstances would be to set the hearing below at naught. It would also be to confer an unwarranted forensic advantage on the party that chose not to appear below. Had the same arguments about the evidence been put below, the other party could have made its own forensic decisions, including the seeking of an adjournment and the adducing of further evidence. As a matter of principle, this loss of that opportunity (whether it would have been taken or not) speaks against any departure from the requirement of finality in litigation. It also speaks strongly against any conclusion of error on the part of the primary judge in respect of contestable evidentiary questions. 16 Taking into account these matters and the reasons below, we have concluded that the appeal must be dismissed, other than in respect of the injunction made on 21 January 2022 which should be set aside as it is too broad and unworkable.