Australian Securities and Investments Commission v Gramax Investment Club Ltd [2005] FCA 1708

FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Gramax Investment Club Ltd [2005] FCA 1708 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v GRAMAX INVESTMENT CLUB LTD & ORS NSD838 OF 2004 EMMETT J 29 SEPTEMBER 2005 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD838 OF 2004

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

PLAINTIFF

AND: GRAMAX INVESTMENT CLUB LIMITED

FIRST RESPONDENT

GRAHAM KENNETH LAUGHLIN

SECOND RESPONDENT

BIRI INTERNATIONAL LIMITED (Incorporated in the Republic of Vanuatu)

THIRD RESPONDENT

BIRI LIMITED (Incorporated in the Republic of Vanuatu)

FOURTH RESPONDENT

CLUBINVEST LIMITED (Incorporated in the Republic of Vanuatu)

FIFTH RESPONDENT

PHILIP BRUCE NORTHAM

SIXTH RESPONDENT

STEVE LOUIS MAGARIC

SEVENTH RESPONDENT

ALLAN VEIVERS

EIGHTH RESPONDENT

PETER DAVID KERIN

NINTH RESPONDENT

JUDGE: EMMETT J

DATE OF ORDER: 29 SEPTEMBER 2005

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: A. THE DECLARATIONS: THE COURT DECLARES THAT WITH RESPECT TO THE FIRST AND SECOND RESPONDENTS: Contravention of section 601ED: 1. The Gramax Scheme ("the Gramax Scheme"), as defined in paragraph 12 of the Statement of Claim ("the Claim") dated 11 August 2004, was a managed investment scheme within the meaning of section 9 of the Corporations Act. 2. Between about 19 July 2003 and 4 June 2004 Gramax contravened section 601ED (5) of the Corporations Act by operating the Gramax Scheme in Australia, in circumstances where the Gramax Scheme was not registered under section 601EB of the Corporations Act. Contraventions of sections 911A: 3. From about 19 July 2003, Gramax and the Second Respondent ("Mr Laughlin")contravened section 911A of the Corporations Act, by: (a) making recommendations and statements intended to influence persons within Australia in making decisions to invest in the Gramax Scheme; (b) issuing interests in the Gramax Scheme to persons within Australia; and (c) otherwise operating the Gramax Scheme, in circumstances where neither of them held an Australian financial services license. Contraventions of sections 911B: 4. From about 19 July 2003, Mr Laughlin contravened section 911B of the Corporations Act, by: (a) making recommendations and statements, on behalf of Gramax, which were intended to influence persons within Australia in making decisions to invest in the Gramax Scheme; (b) issuing, on behalf of Gramax, interests in the Gramax Scheme to persons within Australia; (c) otherwise operating the Gramax Scheme on behalf of Gramax; and (d) by investing some of the monies received for the Gramax Scheme in the fifth respondent ('Clubinvest'), in circumstances where neither Gramax, Mr Laughlin nor Clubinvest held an Australian financial services license. 5. Between about 19 July 2003 and 4 June 2004, Gramax contravened section 911B of the Corporations Act, by: (a) receiving monies from Australian investors for investment in the Gramax Scheme; and (b) investing some of those monies in Clubinvest, in circumstances where neither Gramax nor Clubinvest held an Australian financial services license. Contravention of section 12DA: 6. Between about 19 July 2003 and 4 June 2004, the First Respondent ('Gramax') published, in Australia, the Gramax Website Documents ('Gramax Website Documents'), as defined in paragraph 98 of the Claim. 7. The Gramax Website Documents contained material which conveyed the following ('the Gramax Representations'): (a) from the period January 2001 to March 2004, it had achieved monthly returns of between 1.7 % to 2.7%; (b) from the period commencing 2001 to 2003, it had achieved average yearly returns of between 28.5 % and 31%; (c) it operated out of Vanuatu; (d) it had more than one director and staff resident in Vanuatu; (e) Mr Laughlin had 10 years of experience in the financial and investment industry; (f) Mr Laughlin conducted due diligence of investment opportunities commensurate with that experience published on the Gramax Website; (g) Mr Laughlin dealt with a worldwide network of brokerage houses, traders and investment vehicles; (h) it had a large number of members from around the world; (i) had superior audit and reporting systems; and (j) it had received deposits in excess of a million dollars from investors. 8. Each of the Gramax Representations was untrue, false, incorrect, misleading and deceptive. THE COURT DECLARES THAT WITH RESPECT TO THE THIRD TO NINTH RESPONDENTS: 9. Gramax contravened section 12DA of the Australian Securities & Investments Commission Act in respect of the Gramax Scheme by preparing and publishing the Gramax Website Documents in circumstances where those documents contained material which conveyed the Gramax Representations which were untrue, false, incorrect, misleading and deceptive. Contravention of section 601ED: 10. The Biri Scheme ('the Biri Scheme'), as defined in paragraph 15 of the Statement of Claim ('the Claim') dated 11 August 2004, was a managed investment scheme within the meaning of section 9 of the Corporations Act. 11. Between about 7 May 2001 and 1 July 2003 the third respondent ('Biri') contravened section 601ED (5) of the Corporations Act by operating the Biri Scheme in Australia, in circumstances where the Biri Scheme was not registered under section 601EB of the Corporations Act. Contravention of section 780 of the Corporations Act and the Corporations Law: 12. Between 6 March 2001 and 14 July 2001 Biri contravened section 780 of the Corporations Law, and between 15 July 2001 and 10 March 2002 Biri contravened section 780 of the Corporations Act, by (a) engaging in conduct within Australia within the meaning of section 911D of the Corporations Act, which was likely to induce persons to invest in the Biri Scheme; (b) issuing interests in the Biri Scheme to persons within Australia; and (c) otherwise operating the Biri Scheme, in circumstances where it did not hold a dealers license. Contraventions of section 911A 13. From 11 March 2002 to 1 July 2003 Biri contravened section 911A of the Corporations Act, by: (a) engaging in conduct within Australia within the meaning of section 911D of the Corporations Act, which was likely to induce persons to invest in the Biri Scheme; (b) issuing interests in the Biri Scheme to persons within Australia; and (c) otherwise operating the Biri Scheme, in circumstances where it did not hold an Australian financial services license. 14. From 3 June 2001 the fifth respondent ('Clubinvest') contravened section 911A of the Corporations Act, by: (a) engaging in conduct within Australia within the meaning of section 911D of the Corporations Act, which was likely to induce persons to invest in the Clubinvest Scheme; (b) issuing interests in Clubinvest to persons within Australia; and (c) otherwise operating Clubinvest, in circumstances where it did not hold an Australian financial services license. Contraventions of section 911B Corporations Act: 15. From 11 March 2002 the sixth respondent ("Mr Northam") and the eighth respondent ('Mr Veivers') contravened section 911B of the Corporations Act, by: (a) engaging in conduct within Australia within the meaning of section 911D of the Corporations Act, which was likely to induce persons to invest in the Biri Scheme and Clubinvest; (b) issuing, on behalf of Biri, interests in the Biri Scheme to persons within Australia; (c) issuing, on behalf of Clubinvest, interests in Clubinvest to persons within Australia; and (d) otherwise operating the Biri Scheme and Clubinvest on behalf of Biri and Clubinvest; in circumstances where neither Biri, Clubinvest, Mr Northam nor Mr Veivers held an Australian financial services license. Contravention of section 727 Corporations Act: 16. From 31 March 2003 Clubinvest contravened section 727 of the Corporations Act, by: (a) making offers of shares in Clubinvest to persons within Australia; (b) issuing Clubinvest shares to members of the Biri Scheme proportionate to their interest in the Biri Scheme; and (c) making offers to existing Clubinvest shareholders to acquire shares in BTC Limited, (d) without a disclosure document for the offer having been lodged with ASIC. B. THE COURT ORDERS THE COURT ORDERS THAT WITH RESPECT TO THE FIRST AND SECOND RESPONDENTS: The compliance orders: 17. Pursuant to section 1324(1) of the Corporations Act, that Gramax by itself, its servants, agents and employees is permanently restrained from operating, in Australia, an unregistered managed investment scheme in contravention of section 601ED(5) of the Corporations Act. 18. Pursuant to section 1324(1) of the Corporations Act, that each of Gramax and Mr Laughlin, by themselves, their servants, agents and employees is permanently restrained from carrying on, in Australia, a financial services business in contravention of section 911A(1) of the Corporations Act. 19. Pursuant to section 1324(1) of the Corporations Act, that each of Gramax and Mr Laughlin, by themselves, their servants, agents and employees is permanently restrained from providing financial services in Australia on behalf of another person in contravention of section 911B of the Corporations Act. The banning order: 20. Pursuant to section 1101B of the Corporations Act, Mr Laughlin be restrained from, either directly or indirectly: (a) providing financial product advice within the meaning of section 766B of the Corporations Act; (b) dealing in a financial product within the meaning of section 766C of the Corporations Act; or (c) operating a registered scheme within the meaning of section 9 of the Corporations Act, for a period of 5 years commencing on the date of these orders.