Case: Australian Securities and Investments Commission v McDougall (2006) 229 ALR 158
Outcome: cited
Stephen McDougall earlier devised and operated a scheme known as "FullTank" which was wound up as an unregistered managed investment scheme by order of Young J on 20 April 2006: Australian Securities and Investments Commission v McDougall (2006) 229 ALR 158. 7 Under the FullTank scheme participants would pay a flat "Membership Fee" and a "Plan Fee". They were issued with a debit card which could be used to purchase fuel and other goods at service stations through the EFTPOS system. The debit card would be loaded each week with a nominated amount for purchases. The promise held out was that over a given period participants could receive an effective discount of 50 per cent. For example, for a Plan Fee of $250 the participant was promised $25 worth of fuel per week for 20 weeks. 8 The FUELbanc scheme also involves debit cards issued for the purchase of fuel. Its distinguishing feature, however, is the use of a barter system known as "E Banc" in which goods and services are exchanged for barter units known as "trade dollars" as well as ordinary Australian currency. E Banc is operated by E Banc Trade Pty Ltd. That company is not connected with the defendants and is not involved in the present proceeding. E Banc maintains a central register where its members' barter units and balances and unit transfers are recorded. 60 A number of courts have made declarations in cases involving contraventions which carried criminal penalties, albeit with no express discussion of the point raised in Intertax . Nevertheless, the consistent practice is a matter of considerable weight. The cases are: Australian Securities and Investments Commission v Atlantic 3 Financial (Aust) Pty Ltd [2006] QCA 540 (Queensland Court of Appeal), Australian Securities and Investments Commission v PFS Business Development Group Pty Ltd (2006) 57 ACSR 553 (Hargrave J, Supreme Court of Victoria), McDougall (Young J, Federal Court), Australian Securities and Investments Commission v Preston [2005] FCA 1805 (Finkelstein J, Federal Court), Australian Securities and Investments Commission v Drury Management Pty Ltd [2004] QSC 68 (Jones J, Supreme Court of Queensland), Australian Securities and Investments Commission v Young [2003] QSC 29 ; (2003) 21 ACLC 655 (Muir J, Supreme Court of Queensland), Pegasus (Davies AJ, Supreme Court of New South Wales), Australian Securities and Investments Commission v Hutchings (2001) 19 ACLC 1454 (Windeyer J, Supreme Court New South Wales), Australian Securities and Investments Commission v Sweeney [2001] NSWSC 114 (Austin J, Supreme Court of New South Wales). 61 I conclude that I should not follow Intertax . It is appropriate to make the declarations sought. It is sometimes said that a declaration is an appropriate way of marking the Court's disapproval of the contravening conduct: see eg McDougall at [55]. While certainly the conduct of the corporate defendants and Stephen McDougall has been reprehensible, the actual declarations do no more than declare the bare facts that the defendants operated an unregistered managed investment scheme and carried on a financial services business without a licence. The declarations would be equally appropriate if the defendants' business had been carried on with exemplary prudence and meticulous bookkeeping. A more satisfactory rationale may be that the right declared will be a public right. In Tobacco Institute (at 98) Sheppard J said that the declaration in that case would " ... be a declaration of right because the right which will be declared will be a public right, namely, the right of the public not to be misled or deceived by factual statements in an advertisement concerning the effects of passive smoking." In the present case the legislation contravened protects public rights by regulating the conduct of those who seek investment from the public. Declarations as to the contraventions provide a formal vindication of the law's operation.