Cassimatis civil penalty proceeding
On 21 December 2010 ASIC (as Applicant) began legal action in the Federal Court of Australia (Brisbane) against the executive directors of Storm Financial Limited (Receiver and Manager Appointed)(In Liquidation)(“Storm”), Emmanuel and Julie Cassimatis (as Respondents).
In this proceeding ASIC alleges that Emmanuel and Julie Cassimatis breached their duties as directors under Australia’s corporate law.
ASIC believes Emmanuel and Julie Cassimatis were responsible for Storm providing a commoditised financial advice service to its clients, that is, 'one size fits all' financial advice, rather than advice related to each person's individual financial circumstances (“the Storm model”). The clients the subject of the proceeding are a number of investors who were at or near retirement, with limited or no income and few assets.
ASIC’s case is that the Storm model caused Storm to:
1. breach its responsibilities to provide:
- efficient, honest and fair financial services, and
- advice that is tailored to an individual’s circumstances,
(because the Storm model involved clients receiving the same commoditised advice, that did not differentiate between clients' individual circumstances);
2. provide false and misleading information in the statements of advice issued to Storm’s clients; and
3. provide negligent financial advice to its clients and to breach its contractual duties to exercise reasonable care and skill in providing financial advice to its clients.
In so doing, ASIC alleges that the Emmanuel and Julie Cassimatis exposed Storm Financial to the risk of prosecution by ASIC and civil proceedings by investors and thereby breached their duties as directors.
ASIC is seeking the following:
- Emmanuel and Julie Cassimatis pay a penalty for each instance where they are found to have breached their duties as directors of Storm. The amount for each breach is a matter to be determined by the Court and can be up to $200,000
- both Emmanuel and Julie Cassimatis be disqualified from managing a company for a period that the Court thinks fit; and
- both Emmanuel and Julie Cassimatis be prevented from holding an Australian financial services license, or from providing financial services in Australia, for a period that the Court thinks fit.
ASIC was successful in this proceeding and is now preparing for the penalty hearing. Any penalties paid by the Cassimatises will not form part of investor compensation as the Corporations Act 2001 requires that they be paid to the Commonwealth Government.
1 February 2017
On 1 February 2017, Justice Dowsett heard submissions on penalty and costs. The parties are to make further written submissions and the decision has been reserved.
7 September 2016
On 7 September 2016, Justice Edelman ordered that the proceeding be set down for a hearing on remedies and costs on 1 February 2017.
29 August 2016
On 26 August, 2016, the Federal Court found that Emmanuel and Julie Cassimatis breached their duties as directors of Storm Financial. The Court also found that Storm Financial provided inappropriate advice to certain investors. The matter will be listed for a further hearing at a later date to determine what civil penalties and disqualification orders should be imposed on the Cassimatises as a result of the breach of their director duties.
4 July 2016
The trial reconvened on 6 June 2016 at which time ASIC opened its case and called various lay and expert witnesses. The respondents did not give evidence or call any witnesses in their defence. Following closing oral submissions by the parties on 29 June 2016, Justice Edelman reserved his judgment. A date for the delivery of the judgment is yet to be published.
30 May 2016
The trial commenced on 30 May 2016 and ASIC opened its case. On 31 May 2016 Edelman J allowed ASIC to amend its pleadings and originating application to add relief under s206E of the Corporations Act. The trial has been adjourned until 6 June 2016 to enable corresponding amendments to the defence and the reply. ASIC intends to begin its witness evidence on 6 June 2016.
18 May 2016
At the directions hearing that took place on 18 May 2016, Justice Edelman made further adjustments to the programming orders for the trial scheduled to commence on 30 May 2016. The parties' experts are to produce the joint report by 19 May 2016.
22 April 2016
At the directions hearing that took place on 22 April 2016, Justice Edelman made various adjustments to the programming orders for the trial scheduled to commence on 30 May 2016. The parties' experts are to confer and produce a joint report by 6 May 2016. The next directions hearing is scheduled for 18 May 2016.
3 March 2016
The directions hearing scheduled for 4 March 2016 was vacated. Justice Edelman ordered that the respondents deliver any expert evidence by 1 April 2016 and in the event the respondents serve any expert evidence, the parties' respective experts are to confer and provide a joint report by 29 April 2016. The next directions hearing is scheduled for 22 April 2016.
19 February 2016
At the directions hearing that took place on 19 February 2016, Justice Edelman made orders preparatory to the trial which is fixed to commence on 30 May 2016. It is expected the trial will run for 5 weeks and conclude by 30 June 2016. The next directions hearing is scheduled for 4 March 2016.
15 January 2016
The directions hearing scheduled for 3 February 2016 has been vacated. The respondents were given an extension of until 4 December 2015 to deliver the balance of their lay witness evidence, and accordingly, ASIC has been given until 15 February 2016 to deliver any further evidence in reply. The next directions hearing is scheduled for 19 February 2016.
28 October 2015
The directions hearing scheduled for 28 October 2015 was vacated. Justice Edelman ordered that the respondents have until 6 November 2015 to deliver the balance of their lay witness evidence, and accordingly, ASIC has been given until 1 February 2016 to deliver its evidence in reply. The next directions hearing is scheduled for 3 February 2016.
26 August 2015
At the directions hearing that took place on 26 August 2015, Justice Edelman made orders including that the matter be provisionally set down for trial for six weeks on and from 30 May 2016. His Honour also ordered that the respondents serve any additional lay witness statements by 23 October 2015. The next directions hearing is scheduled for 28 October 2015.
15 July 2015
The directions hearing scheduled for 15 July 2015 was vacated. Justice Edelman ordered that the respondents deliver their notice of objections to claims made by ASIC for legal professional privilege by 24 July 2015. The next directions hearing is scheduled for 26 August 2015.
3 June 2015
At the directions hearing on 3 June 2015, Justice Edelman vacated the orders that dealt with the parties' experts preparing a joint report as the respondents had not briefed an expert. The next directions hearing is scheduled for 15 July 2015.
1 May 2015
At the directions hearing on 1 May 2015, Justice Edelman issued a number of orders to progress the proceedings, including that Mr and Mrs Cassimatis file the evidence upon which they intend to rely in their defence by 24 August 2015. The next directions hearing was scheduled for 3 June 2015
16 March 2015
At the directions hearing held on 16 March 2015 the Court ordered a timetable for the parties to progress the proceedings, including discovery of documents. The proceeding is listed for a directions hearing on 24 April 2015 in the Federal Court in Brisbane.
7 and 10 November 2014
The parties participated in a confidential mediation on 7 and 10 November 2014, which did not result in any agreement to resolve the proceedings. ASIC's action will continue and will be listed for directions before the court on a date to be fixed.
18 July 2014
At today's directions hearing before Justice Rangiah, ASIC sought orders for an extension of time for the filing of ASIC's amended pleading, and for a referral to mediation.
Justice Rangiah made the following orders:
- ASIC has an extension of time until 15 August 2014 to file its amended pleading.
- ASIC is to deliver a draft of the amended pleading to the Cassimatises by 1 August 2014.
- The parties are to attend a mediation on or before 19 September 2014 and ASIC is to pay the mediator's fees.
22 May 2014
On 22 May 2014 the Full Court of the Federal Court heard the appeal by the Cassimatises from the judgment of Justice Reeves on 28 June 2013 denying the Cassimatises' application for summary judgment. The Full Court, by consent of both parties, dismissed the Cassimatises' appeal.
The Full Court also made orders for ASIC to amend certain aspects of its pleading in order to further clarify the case that ASIC is bringing against the Cassimatises.
20 November 2013
Justice Rangiah today heard applications by the Cassimatises seeking leave to appeal the judgment of Justice Reeves on 28 June 2013 dismissing their application for summary judgment and leave to appeal the judgment of Justice Reeves on 4 October 2013 dismissing their application to strike out ASIC's Statement of Claim. Leave was not granted to appeal the 4 October judgment, however, leave to appeal on a limited ground of appeal was granted in relation to the 28 June 2013 judgment.
At this stage, it is not known when that appeal will be heard.
In the meantime, there is a programming timetable in place to progress the main proceedings.
4 October 2013
The Federal Court today ruled on a strike out application of ASIC’s statement of claim in its civil penalty proceedings against Storm Financial founders Emmanuel and Julie Cassimatis, following the hearing of the application by Justice Reeves on 10 September 2013.
The Cassimatises were unsuccessful in their application to have the statement of claim struck out. However, the court did make orders that ASIC either re-plead some parts and provide further particulars of some parts of its statement of claim.
10 September 2013
The Cassimatis Civil penalty proceeding returned to court today before Her Honour Justice Collier and His Honour Justice Reeves.
Directions hearing on the Cassimatises' appeal of the summary judgment decision
This directions hearing was heard before Justice Collier. Because Her Honour was a Commissioner of ASIC a number of years ago the Cassimatises' lawyer objected to Justice Collier hearing the application. As a result, Her Honour decided it was not appropriate for her to hear the matter and recused herself. The applications by the Cassimatises' seeking an extension of time to appeal and also for leave to appeal were adjourned pending the outcome of the strike out application.
The hearing of the Cassimatises' application to strike-out certain parts of ASIC's pleading
This application was heard by Justice Reeves. His Honour has reserved his decision.
24 July 2013
The Cassimatis Civil penalty proceeding returned to court today before His Honour Justice Reeves.
Justice Reeves ordered that the Cassimatises pay ASIC's costs of the summary judgment application (heard on 19 September 2012) as the Cassimatises lost that application. The summary judgment application concerned the interpretation of section 181 of the Corporations Act 2001and specifically the duty of directors to act in the best interests of the company.
Appeal of the summary judgement decision
The Cassimatises' have filed an application seeking an extension of time for leave to appeal the summary judgement decision and that application will be heard on 16 August 2013 before Justice Dowsett in the Federal Court.
The Cassimatises confirmed they will pursue their strike-out application. This has been set down for hearing on 18 October 2013.
ASIC presented a programming timetable to the Court. The Cassimatises argued against such directions being made, instead arguing for the matter to be postponed pending the outcome of the strike-out application, their appeal of the summary judgment application, and separate proceedings against their insurers in the Supreme Court. His Honour disagreed and asked the parties to discuss and agree on a timetable based upon the draft timetable prepared by ASIC. ASIC and the Cassimatises' lawyers conferred and agreed on a proposed timetable, which has since been ordered by the Court. The key events and dates are as follows:
- On or before 16 October 2013, ASIC is to serve witness statements for all lay and expert witnesses it proposes to call at Trial; and shall also give notice to the Cassimatises as to the name of any witness who it intends to call at Trial who has declined to provide such a statement.
- On or before 27 February 2014, the Cassimatises are to serve witness statements for all lay and expert witnesses they propose to call at Trial; and shall also give notice to ASIC as to the name of any witness who it intends to call at Trial who has declined to provide such a statement.
- On or before 16 April 2014, ASIC is to serve statements in reply containing the evidence of each witness it proposes to call at Trial.
- On or before 16 July 2014, ASIC and the Cassimatises are to serve on the other a proposed list of agreed facts.
- By 4pm on 20 August 2014, ASIC is to file a written outline of its opening submissions.
- By 4pm on 3 September 2014, the Cassimatises are to file a written outline of their opening submissions.
Note: On 28 August 2013 at a directions hearing before Justice Reeves concerning the Cassimatises strike out application, his Honour brought the hearing date for the application forward to 10 September 2013. It was originally listed for 18 October 2013.
28 June 2013
The Cassimatis Civil penalty proceeding returned to court today before His Honour Justice Reeves, for the delivery of the reserved judgment on the application by the Cassimatises for summary judgment against ASIC.
The court dismissed that application.
The Cassimatises has also filed an application seeking an order that ASIC's Statement of Claim be struck out. That application is yet to be heard by the court.
The proceedings have been listed for directions on 11 July 2013 before Justice Reeves at which time the court will consider submissions on costs arising from the dismissal of the Cassimatises' application and also enter a timetable to track the proceedings to trial.
19 September 2012
The Cassimatis Civil penalty proceeding returned to court today before His Honour Justice Reeves, for the hearing of an application by the Cassimatises for summary judgment against ASIC. Effectively, it was argued by the Cassimatises that the case against them was not sustainable and so judgment should be entered in their favour.
Following written and oral submissions by both parties, his Honour reserved his decision.
The Cassimatises have also filed an application seeking an order that ASIC's Statement of Claim be struck out. That application is yet to be heard by the court.
The proceedings have been adjourned until the delivery of his Honour's judgement.
7 June 2012
The Cassimatis Civil penalty proceeding returned to court today for directions before His Honour Justice Dowsett.
The Cassimatises' proposed summary judgement and strike out applications have now been divided.
The summary judgment application will be heard on 19 September 2012. Essentially, the summary judgement application relates to the interpretation of section 181 of the Corporations Act 2001 and specifically the duty of directors to act in the best interests of the company.
The strike-out application has been adjourned to a date to be fixed, awaiting the outcome of the summary judgment application.
ASIC anticipates that further directions, concerning both the hearing of the Cassimatises' strike out application and preparation towards trial, will be made sometime after the conclusion of the 19 September 2012 hearing.
15 May 2012
The Cassimatis Civil penalty proceeding returned to court today for directions before His Honour Justice Reeves.
The Cassimatises' proposed summary judgment and strike-out application had been set down for hearing for three days, commencing 15 May 2012. However, due to His Honour being unavailable for the entire three days, the date for the hearing of the Cassimatises' application was deferred for a 3 day period on or after 17 September 2012 - being the next date on which the Cassimatises' barrister is available.
As the trial for the ASIC UMIS proceedings is scheduled between 10 September 2012 and the end of December 2012, before His Honour Justice Reeves, the hearing of the Cassimatises' application will need to proceed before another judge of the Federal Court.
Due to the delay in the hearing of the Cassimatises' application, the existing timetable to advance to a tentative trial date, in April 2013, has been vacated by His Honour. A new timetable will now not be ordered until after the hearing of the Cassimatises' application later in the year.
The proceedings are adjourned to a further directions hearing on a date yet to be fixed, following the hearing of the Cassimatises' application.
16 February 2012
The Cassimatis Civil penalty proceeding returned to court today for directions before the Honourable Justice Reeves.
His Honour allocated a hearing date for the Cassimatises' proposed summary judgment and strike-out applications. There was also discussion on how long the parties would need to prepare for trial and setting a tentative trial date.
The court made the following orders:
- A tentative trial date was set for 29 April 2013.
- The Cassimatises' proposed summary judgment and strike-out applications are set down for hearing for three days, commencing 15 May 2012 at 10:15am.
- The parties are to deliver an agreed proposed timetable for both the hearing of the applications and progressing the proceedings to trial, by close of business on 20 February 2012 ( "the parties timetable").
- If the parties are unable to agree on a timetable either can apply to the court for further orders.
- The proceedings are listed for any further directions on 15 May 2012.
On 21 February 2012 the parties timetable was submitted to the court.
30 November 2011
The hearing on 30 November 2011 before His Honour Justice Reeves in the Federal Court in Brisbane related primarily to the question of when the Cassimatises should file a defence to ASIC's further amended statement of claim.
On 1 August 2011, his Honour ordered that the Cassimatises were to file their defence by 4 November 2011. The Cassimatises had not done so and were seeking an extension until 30 March 2012.
Justice Reeves expressed his dissatisfaction with the Cassimatises in failing to formally seek the Court's indulgence prior to 4 November 2011, the date the defence was due.
His Honour stated that, reluctantly, he would allow the Cassimatises an extension of time until 3 February 2012 in which to file their defence.
A further directions hearing was set down for 16 February 2012. His Honour indicated that at that directions hearing he intended to fix a tentative trial date and trial program and that the parties should be prepared accordingly with draft timetables.
His Honour also made a procedural order, granting ASIC leave to file a Further Amended Originating Application.
The orders made by the Court were as follows:
- ASIC was granted leave to file its Further Amended Originating Application.
- The time in which the Respondents are to file their defence be extended to the close of business on 3 February 2012.
- The matter be listed for a further directions hearing on 16 February 2012 at 9:30am.
- The costs of and incidental to this motion be the parties' costs in the cause (this means that the costs of the interlocutory hearing will be paid by the party that loses the case in the end).
1 August 2011
The proceeding before His Honour Justice Reeves returned to Court to consider ASIC's application for leave to further amend its Statement of Claim.
The outcome of the hearing was that various orders were made by the Court, the primary orders being that ASIC file and serve its Further Amended Statement of Claim, with the Cassimatises to file and serve their defence to the Further Amended Statement of Claim by the close of business on 4 November 2011.
His Honour also ordered that the Cassimatises are to give notice to ASIC by 4pm on 5 August 2011 regarding the production of documents referred to in the Further Amended Statement of Claim, with ASIC to provide all such documents to the Cassimatises by 4pm on 12 August 2011.
The proceeding was adjourned to a further Directions Hearing to be held at 9.30 am on 25 November 2011.
18 July 2011
At the proceeding on 15 June 2011, by virtue of the further directions made by His Honour Justice Reeves (that ASIC undertake further amendments to its pleading), ASIC agreed to meet the Cassimatises' costs of that hearing. The Cassimatises argued that the costs ordered that day should be taxed and paid by ASIC forthwith. ASIC opposed the Cassimatises' argument.
As a general rule the Federal Court Rules provide that the costs of interim hearings are not paid until the proceedings are concluded. However, the Court can vary that rule at its discretion where it is satisfied that the interests of justice require a departure from the rule.
In his judgement delivered today, His Honour ordered that the Cassimatises' could recover the costs that were otherwise ordered at the last hearing forthwith.
The proceedings will be next before the Court on 1 August 2011 at 9.30am when ASIC's application for leave to further amend its Statement of Claim will be considered by the Court.
14 and 15 June 2011
The proceeding returned to Court for the hearing of an application, brought by the Cassimatises, to strike out all or part of ASIC's Statement of Claim, being the document that sets out ASIC claims against the Cassimatises in the proceeding. The hearing proceeded before His Honour Justice Reeves in the Federal Court at Brisbane.
ASIC opposed the Cassimatises' application. However, His Honour suggested that certain amendments should be made to parts of the Statement of Claim that were not the subject of the Cassimatises' application. To assist the Court, ASIC indicated the nature of amendments it could make to the Statement of Claim which would accommodate both His Honour's suggestions and the majority of the objections raised by the Cassimatises in their application.
The outcome of the hearing was that various orders were made by the Court, the primary order being that ASIC file and serve by the close of business on 13 July 2011 a Notice of Motion seeking leave to further amend its Statement of Claim.
The proceeding was adjourned to a further Directions Hearing to be held at 9.30 am on 1 August 2011, where ASIC's application for leave to further amend its Statement of Claim will be considered by the Court.
24 February 2011
The Cassimatis Civil penalty proceeding returned to Court today for directions before the Honourable Justice Reeves.
At this hearing various orders were made by the Court including:
- ASIC was ordered to file and serve its amended Statement of Claim by 21 April 2011; and
- The Cassimatises were ordered to file and serve any application to stop ASIC’s proceedings by 13 May 2011 and this will be heard by the Court on 14 and 15 June 2011. Orders were also made for the Cassimatises to provide additional material in support of their application and for ASIC to file it defence between these dates;
The Court advised that further directions would be made after 15 June 2011.
4 February 2011
This proceeding was before the Honourable Justice Logan of the Federal Court of Australia for the first time on 4 February 2011.
At this Court appearance the judge disqualified himself from hearing the matter because he had previously presided as the judge in the proceedings ASIC brought to wind up Storm in early 2009.
In these circumstances Justice Logan directed that the matter be relisted for directions before another judge.
The matter is now next before the court on 24 February 2011 for directions.