In Australian Securities and Investments Commission v Cassimatis (No 9) [2018] FCA 385 Justice Dowsett of the Federal Court determined the penalties to be imposed on the directors of Storm Financial, Emmanuel and Julie Cassimatis, who were previously found by the Court to have breached their duties as directors. Background.
He penalised the directors $70,000 each. They were also disqualified from managing corporations for 7 years.
The trial judge concluded that no criminal conduct had been proven.
Justice Dowsett observed that:
“The respondents submit that their contraventions of s 180(1) were not, separately or collectively, serious. In this respect, the respondents’ submissions are misconceived. More importantly, the submissions bespeak a refusal to acknowledge, even at this stage, the obvious seriousness of their misconduct.
The respondents sought to discount the seriousness of their respective breaches of s 180(1) by comparing them to breaches of other provisions of the Act which breaches were also dealt with under s 1317G. …The relevant question is, however, whether the respondents’ contraventions were, in all the circumstances, serious. In my view, to offer investment advice to vulnerable investors without regard to their vulnerability is, of itself, serious misconduct.
In circumstances where the conduct of Mr and Mrs Cassimatis exposed Storm to the potential loss of its AFSL, and thereby to a threat to its very existence “this case is fundamentally about directors failing in their duties in a way that went to the very core of the company’s business.” It is not easy to identify the characteristics of the notionally most serious example of particular misconduct. However it is fair to say that the respondents established and maintained a system by which inappropriate investment advice was given to vulnerable people. Whilst this conduct was not dishonest, it was a serious breach of the respondents’ duties as directors. The relevant prejudice must be to Storm, its members and creditors. However the prejudice to vulnerable investors necessarily exposed Storm to the possibility of adverse claims, proceedings for breaches of the Act and prejudice to its holding of an AFSL. There can be no doubt that the respondents’ contraventions were serious.”
In assessing the penalty Justice Dowsett had regard to the penalties in the AWB cases and to the cases concerning James Hardie Industries Ltd and its officers.
