Australian Securities and Investments Commission v Squirrel Superannuation Services Pty Ltd

• Jurisdiction: Australia Federal only
• Court: Federal Court
• Judgment Date: 20 June 2022
• Neutral Citation: [2022] FCA 702
• Date: 20 June 2022

Federal Court of Australia

Australian Securities and Investments Commission v Squirrel Superannuation Services Pty Ltd [2022] FCA 702

File numbers:	NSD 1374 of 2020
Judgment of:	BURLEY J
Date of judgment:	20 June 2022
Catchwords:	CORPORATIONS – financial services – false or misleading representation that financial services have sponsorship, approval, performance characteristics, uses or benefits – misleading conduct as to the nature, characteristics, suitability for purpose or quantity of financial services – where the defendant admitted liability for contraventions – where the plaintiff and defendant prepared a statement of agreed facts and jointly proposed a pecuniary penalty of $55,000 – whether proposed penalty appropriate – held: defendant ordered to pay pecuniary penalty of $55,000
Legislation:	Australian Securities and Investments Commission Act 1989 (Cth) ss 12BAB(1), 12DA(1), 12DB(1)(e), 12DF(1), 12GBA Corporations Act 2001 (Cth) s 913B Fair Work Act 2009 (Cth) s 546 Federal Court of Australia Act 1976 (Cth) s 21
Cases cited:	Australian Building and Construction Commission v Pattinson [2022] HCA 13; 399 ALR 599 Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; 262 FCR 243 Australian Securities and Investments Commission v Allianz Australia Insurance Limited [2021] FCA 1062 Mill v The Queen [1988] HCA 70; 166 CLR 59 Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249
Division:	General Division
Registry:	New South Wales
National Practice Area:	Commercial and Corporations
Sub-area:	Regulator and Consumer Protection
Number of paragraphs:	72
Date of hearing:	15 March 2022
Counsel for the Plaintiff:	Mr N J Beaumont SC with Mr J L Clark
Solicitor for the Plaintiff:	Mr C Gray
Counsel for the Defendant:	Mr D Stack
Solicitor for the Defendant:	Bridges Lawyers

ORDERS

		NSD 1374 of 2020
BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff
AND:	SQUIRREL SUPERANNUATION SERVICES PTY LTD Defendant

order made by:	BURLEY J
DATE OF ORDER:	20 JUNE 2022

PURSUANT TO S 21 OF THE FEDERAL COURT OF AUSTRALIA ACT 1976 (CTH), THE COURT DECLARES THAT:

1. By distributing to members of the public at a seminar on 28 April 2015 as well as by email on 9,420 occasions in the period March 2015 to January 2019, a brochure (in the form of the annexure to the judgment) conveying representations that:

   1. the “old rule of thumb is that residential property in metropolitan locations doubles in value every 7-10 years and generates a rental return of around 4-5% per annum”;

   2. if one were to purchase an investment property worth $800,000 using a 25% deposit from one’s superannuation fund, and taking out a mortgage for the balance ($600,000), one would obtain:

      1. an average annual return in the form of capital growth of 10%, and hence annual capital growth of $80,000;

      2. an average annual rental income of 4%, thus $32,000; and

      3. an average total return of $112,000 (or a total of 14%);

   3. if one took the “traditional approach” of investing $200,000 in a regular superannuation fund, one would obtain an average annual return of $14,000 (or 7%), as compared with the average annual return of $112,000 (or 14%) from taking the approach referred to in representation (b) above, and as such, the difference between the two strategies is “remarkable”; and

   4. the costs to manage an investment property through a self-managed superannuation fund are “surprisingly low” compared with using a financial planner to select a series of managed investment funds and, in particular, that the annual costs of the former (given an investment property valued at $800,000) are around $2,400, whereas the annual costs of the latter (given a managed investment of $800,000) are around $8,800,

the Defendant in trade or commerce:

5. engaged in conduct in relation to financial services that was misleading or deceptive or was likely to mislead or deceive, contrary to s12DA(1) of the Australian Securities and Investments Commission Act 1989 (Cth);

6. in connection with the supply or possible supply of financial services, or in connection with the promotion of the supply or use of financial services, made false or misleading representations that services had performance characteristics or benefits, in contravention of s12DB(1)(e) of the Act; and

7. engaged in conduct that was liable to mislead the public as to the nature, characteristics and suitability for purpose of financial services, in contravention of s12DF(1) of the Act

THE COURT ORDERS THAT:

2. Pursuant to s 12GBA(1)(a) of the Act, the defendant pay to the Commonwealth a pecuniary penalty in the amount of $55,000.

3. The defendant pay the plaintiff’s costs in the sum of $20,000.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1 INTRODUCTION	[1]
2 RELEVANT LEGISLATION	[5]
3 THE RELEVANT AGREED FACTS	[12]
3.1 Squirrel	[13]
3.2 The first representation	[18]
3.3 The second representation	[23]
3.4 The third representation	[30]
3.5 The fourth representation	[38]
3.6 Events after first publication of the brochure	[46]
3.7 Admissions of liability	[57]
4 CONSIDERATION	[58]
4.1 Relevant principles in relation to orders by agreement and assessment of penalty	[58]
4.2 Consideration of penalty	[65]

BURLEY J:

1. INTRODUCTION

1. The Australian Securities and Investments Commission (ASIC) commenced the current proceedings on 18 December 2020 alleging that Squirrel Superannuation Services Pty Ltd had, by the publication of a document entitled “How buying established residential property can super charge your superannuation” (brochure), engaged in conduct in contravention of ss 12DA(1), 12DB(1)(e) and 12DF(1) of the Australian Securities and Investments Commission Act 1989 (Cth).

2. Squirrel is a financial services licensee which, from at least March 2015, marketed and sold its services of assisting customers to establish and operate a self-managed superannuation fund (SMSF), including for the purpose of purchasing residential property. It published the brochure in the course of marketing those services and in so doing made the representations which brought about the proceedings.

3. Although the proceedings were initially contested, Squirrel now admits the alleged contraventions. The parties have cooperated in preparing a statement of agreed facts and admissions, which was filed on 7 February 2022. They join in submitting to the Court that the following orders are appropriate to resolve the...