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19-321MR Court finds Dover Financial Advisers Pty Ltd made false, misleading or deceptive statements in Client Protection Policy, and director knowingly concerned
The Federal Court of Australia has found Dover Financial Advisers Pty Ltd (Dover) engaged in false, misleading or deceptive conduct. The conduct in question involved publishing false, misleading or deceptive statements in a “Client Protection Policy” (Protection Policy) between around 25 September 2015 and 30 March 2018.
The Court found that Terrence (Terry) McMaster, Dover’s sole director, was, as a question of fact, knowingly concerned in that conduct, and was satisfied it was appropriate to make a declaration that Mr McMaster had contravened section 12DB(1)(i) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
In the judgment, his Honour Justice Michael O’Bryan found that the title of the Protection Policy “was highly misleading and an exercise in Orwellian doublespeak. The document did not protect clients. To the contrary, it purported to strip clients of rights and consumer protections they enjoyed under the law”.
The Protection Policy was provided to 19,402 clients with statements of advice by representatives of Dover. The Protection Policy purported to be 'designed to ensure that every Dover client get [sic] the best possible advice and the maximum protection available under the law’. The Court found that the policy was false, misleading or deceptive in circumstances where:
- it did not ensure that clients received the maximum protections available under the law;
- it purported to remove or dilute the protections that clients would otherwise have had under the law;
- it sought to prevent clients from making a claim against Dover and its authorised representatives on the basis that advice could not be understood;
- it sought to exclude Dover’s liability for most foreseeable breaches of the law by its authorised representatives; and
- it sought to limit or exclude Dover’s liability to clients in a way that was inconsistent with the law.
The Court also found, as a matter of fact, Mr McMaster, Dover’s sole director, Key Person named on Dover’s Australian Financial Services Licence and a Responsible Manager during the relevant period, was knowingly concerned in Dover’s contraventions, having regard to concessions by Mr McMaster, including that he was responsible for:
- determining and/or approving the Protection Policy; and
- requiring Dover’s representatives to incorporate the Protection Policy with statements of advice provided to clients.
‘ASIC brought this case because it believed Dover’s Client Protection Policy was misleading and deceptive. The law imposes important obligations on companies licenced to provide financial advice and for the protection of their clients. Clients who receive financial advice should not be misled as to what those obligations are and what they mean for them and their interests’, ASIC Deputy Chair Daniel Crennan QC said.
His Honour rejected the defendants’ primary submission that because ASIC had not sought to prove that any Dover client had suffered loss or damage by reason of the Protection Policy then the defendants had not engaged in misleading and deceptive conduct within the meaning of the ASIC Act.
In delivering his reasons for judgment, Justice O’Bryan noted that there had been a contravention of the law each time the Protection Policy was sent to a client, being 19,402 times.
Penalties will now be determined by the Court on a date yet to be fixed.
This proceeding was commenced by ASIC on 13 September 2018 and follows the cancellation of Dover’s AFS licence and the entry into an Enforceable Undertaking pursuant to which Mr McMaster agreed to exit from the financial services industry on a permanent basis (18-195MR).
On 20 December 2019, the Court made declarations that Dover contravened s 1041H(1) of the Corporations Act and ss12DA(1) and s12DB(1)(i) of the ASIC Act. The Court also declared that Mr McMaster was knowingly concerned in each of Dover’s contraventions of s12DB(1)(i) of the ASIC Act. The matter is listed for a hearing on penalty on 1 June 2020.
Editor's note 2:
The hearing on penalty occurred on 1 and 2 June 2020. His Honour reserved his decision. The matter is now adjourned.