On Wednesday, the Federal Court ruled against the Australian Securities and Investments Commission (ASIC) in its proceedings against Dixon Advisory director Paul Ryan, ordering the regulator to pay the defendant’s costs.
In delivering his judgment, Justice O’Callaghan highlighted a continuing issue with the way that cases are brought before the Federal Court, namely that concise statements must not be used in complex factual or legal cases.
“I should yet again say something about the use of concise statements,” he said in his judgment.
“Judges of this court have said over and over again that they should not be the vehicle for the hearing of any case that involves complicated, disputed factual and legal issues.”
Rather than using a concise statement, Justice O’Callaghan said the case should have been pleaded in the “conventional way, not in the discursive way permitted by concise statements”.
“The lack of the discipline of pleadings meant that the trial of this proceeding took a course that was untethered to precise allegations of fact and their alleged intersection with, or relevance to, the act, so that a case that was opened as raising three issues was closed on the basis that it raised 16,” he added.
“Which is an unsatisfactory state of affairs, to say the least.”
During a Senate estimates hearing on Thursday, Liberal senator Andrew Bragg quoted Justice O’Callaghan’s judgment to ASIC deputy chair Sarah Court, asking for her “reaction to this”.
“It sounds pretty scathing to me. What do you say about this, and what can ASIC learn?” he said.
In response, Court defended ASIC’s use of concise statements, arguing that the method is part of the practice directions of the Federal Court for commencement of civil litigation proceedings.
“ASIC and other regulators use a concise statement as a matter of course, because that’s what the Federal Court has requested that we do,” she said.
“In more recent times, some of the judges of the Federal Court have formed the view that because the nature of a concise statement, as I think his honour says in the paragraph you just referred us to, that the precision, if you like, of the allegations being made are not set out with great granularity as they are in the traditional statements of claim.
“Some of the judges of the Federal Court are now saying to regulators such as ASIC, we prefer that you use a traditional statement of claim rather than a concise statement. The particular judge in that case was of that view. We accept that, but I do sort of have to say, though, that we use concise statements because the Federal Court has requested us to do so.”
In the Federal Court’s Commercial and Corporations Practice Note, it explains that “the majority of commercial and corporations matters will be assisted by being commenced with a concise statement”.
“Applicants are encouraged to consider the alternatives carefully and to select the use of a concise statement unless it is clearly not an appropriate mechanism,” it said.
It is on this point that Justice O’Callaghan argued ASIC missed the mark, citing five other Federal Court proceedings that chastised the use of concise statements, including three involving ASIC.
In Australian Securities and Investments Commission v LGSS Pty Ltd [2024], for example, Justice O’Callaghan noted in his judgment that “judges of this court have repeatedly pointed to the unsatisfactory nature of concise statements in cases of complexity, or where multiple representations are said to have been conveyed in myriad places”.
Similarly, in Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd [2023], Justice Beach said concise statements are “desirable and can more than adequately take the place of proper pleadings” only in simple factual cases.
“But where there is substantial factual complexity involving circumstances or transactions over a lengthy time frame, which facts are contested, the use of a concise statement should be confined to its valuable triaging function only,” the judge said.
“And this applies all the more so in civil penalty proceedings if a large number of contraventions and a serious factual contest are involved, where both the underlying facts and the number and characterisation of the alleged contraventions need to be identified with precision rather than utilising a superficial narrative form.”
In response to the deputy chair’s defence of ASIC’s process, Senator Bragg said he hoped “in the future, we can put more bad people away”.
“Senator Bragg, you and I are at one on that issue,” Court said.
Unfortunately Paul Ryan was just a pawn in this whole fiasco, who was protecting the ultimate beneficary of his actions, being the majority shareholder in EP1 who happens to be David Evans. Hopefully the Senate inquiry into Wealth Management Companies will call both Alan Dixon and Davis Evans to give evidence to their greedy business practices.
We should establish a petition “Fair Funding for Fair Practices: Reconsider the Compensation Scheme of Last Resort”
The Compensation Scheme of Last Resort (CSLR) unfairly imposes financial burdens on innocent, compliant financial advisers to compensate for the misconduct of other financial services providers, many of whom may operate in entirely different sectors or have ceased operations due to insolvency. As it stands, the CSLR funding model requires contributions from compliant advisers, regardless of their lack of connection to the breaches in question. This approach is unreasonable, as it overlooks the core principle that only those responsible for consumer losses or regulatory failures should bear the financial consequences. Such an industry-wide burden not only undermines the integrity of the advisory profession but also places unwarranted financial pressure on small advisory firms that serve their clients in good faith.
CSLR lets consumers make dodgy high risk investments, safe in the knowledge that if those investments don’t deliver the hoped for returns, innocent advisers will pick up the consumer compensation tab.
CSLR lets advice licensees recommend dodgy inhouse products, safe in the knowledge they can phoenix to another entity if the products fail, and innocent advisers will pick up the consumer compensation tab.
CSLR lets ASIC conduct half arsed prosecution attempts against the architects of dodgy scams, safe in the knowledge that when their prosecutions inevitably fail, innocent advisers will pick up the consumer compensation tab.
CSLR is not a properly functioning consumer compensation scheme. It is an adviser persecution scheme.
You are 100% correct.
Making innocent advisers pay for the wrongdoing of others is morally indefensible.
The CSLR incentivises bad actors and persecutes honest, decent, hard-working advisers. The CSLR is moral hazard on crack.
I am selling and leaving the profession. The CSLR will bankrupt honest advisers.
Yep, it couldn’t possibly be ASIC’s fault. It never is
Useless ASIC fails yet again.
Dodgy Dixon’s MIS fiasco continues and ASIC fail at every turn.
Truely pathetic and costly ASIC
Will Advisers pay the costs the Regulator needs to pay the defendant?
Yep! We fail you pay.
Yes.
Those silks don’t come cheap.