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Friday 28 June 2013

13-158MR ASIC to press ahead with case against Storm Financial founders

ASIC today welcomes the Federal Court’s decision to dismiss an application by Storm Financial founders Emmanuel and Julie Cassimatis seeking summary dismissal of ASIC’s case against them.

The decision means ASIC can pursue its civil penalty proceedings alleging the executive directors breached their directors’ duties.

ASIC is seeking to ban the Cassimatises from the financial services industry and disqualify them from managing companies, as well as the payment of pecuniary penalties.

ASIC will now be asking the court to implement a timetable for these proceedings to be progressed to trial.

‘Since Storm’s collapse ASIC has been seeking compensation for investors as well as pursuing regulatory action against those companies and individuals intrinsically involved in implementing the Storm model,’ ASIC Deputy Chairman Peter Kell said.

In May 2013 ASIC secured $1.1 million in compensation on behalf of two former Storm investors, Barry and Deanna Doyle (refer 13-122MR).

ASIC has also appealed a recent decision of the Federal Court to approve the settlement between former Storm Financial clients and Macquarie Bank Limited. ASIC’s challenge is not to the amount of the settlement, rather to the fairness of the settlement distribution among all of the class action members who are entitled to participate in it (refer 13-120MR). This appeal will be heard by the Full Court of the Federal Court in Brisbane on 5 August 2013.

And last year ASIC and CBA reached an agreement for the bank to provide up to $136 million in compensation for Storm investors who borrowed with the bank (refer 12-227MR).

Background

The Cassimatis matter will return to court for a directions hearing on 11 July 2013, at which time the court will order a timetable to progress the proceedings to trial and also hear argument on the question of costs arising from the court’s decision to dismiss the defendants’ application.

Editor's note 1:

The directions hearing has been rescheduled to 24 July 2013.

Editor's note 2:

At the directions hearing on 24 July 2013 the court ordered that the Cassimatises pay ASIC's costs of the unsuccessful summary judgment application. Orders have also been made for a programming timetable, based upon a draft timetable prepared by ASIC, to progress the proceedings to trial. Under these orders, ASIC's affidavit material is to be served by 16 October 2013. The Cassimatises' affidavit material is due on 27 February 2014.

Editor's note 3:

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 Sept 2013. It was originally listed for 18 Oct 2013.

Editor's note 4:

On 22 May 2014 the Full Court of the Federal Court, by consent of both parties, dismissed the Cassimatises' appeal of their unsuccessful application for summary judgment against ASIC. The Full Court also ordered that ASIC amend its pleading in light of issues raised by the court during the appeal hearing. The amended pleading is required to be filed on or before 4 July 2014.

Editor's note 5:

On 4 July 2014 ASIC filed an application seeking an extension of the time for it to file any amended pleading. It is also seeking an order for the proceedings to be referred to mediation. This application will be heard by the Federal Court on 18 July 2014.

Editor's note 6:

On 18 July 2014, the Federal Court granted ASIC's application seeking an extension to file an amended pleading to 15 August 2014. ASIC is to deliver a draft of the amended pleading to the defendants on 1 August 2014. The Federal Court also heard ASIC's application for the proceedings to be referred to mediation and ordered the parties to attend a mediation on or before 19 September 2014.

Editor's note 7:

On 15 August 2014 ASIC filed its amended pleading in accordance with the court's orders. ASIC also filed an application seeking a dispensation of the Federal Court pleading rules in relation to aspects of the amended pleading and orders for an extension of the time required for the parties to attend a mediation. This application will be heard by the Federal Court on 16 September 2014.

Editor's note 8:

On 16 September 2014, His Honour Justice Rangiah of the Federal Court made the following orders:

  • ASIC be granted a dispensation of the Federal Court pleading rules in relation to a paragraph and a schedule of the amended pleading
  • ASIC be granted leave to file an amended statement of claim within 14 days
  • the final date for parties to attend mediation be extended from 19 September 2014 to 10 November 2014, and
  • costs reserved.

Editor's note 9:

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.

ASIC's dedicated Storm website has more information on the proceedings.

Editor's note 10:

The proceedings has been listed for directions before His Honour Justice Rangiah on 9 December 2014.

Editor's note 11:

The proceedings were listed for directions before Justice Rangiah today. ASIC asked the court to make orders for a timetable to progress the proceedings to trial. The Respondents informed the court that they wished to make another application for summary judgment. The court  declined to enter a trial timetable, however, the Respondents were ordered to file their defence and any application for summary judgment  and any other orders, along with supporting affidavits, by 30 January 2015. Any such applications will be heard  by the court on 16 March 2015 and the matter will also be listed on that date for further directions.

Editor's note 12:

At the direction's hearing held on 16 March 2015  the court ordered a timetable for the parties to progress the proceedings, including discovery of documents. The court also listed the matter for another directions hearing during the week of 20 April 2015 (on a date to be fixed).

Editor's note 13:

The proceedings have been listed for further directions before Justice Edelman in Brisbane on 1 May 2015.

Editor's note 14:

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.

Editor's note 15:

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.

Editor's note 16:

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.

Editor's note 17:

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.

Editor's note 18:

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.

Editor's note 19:

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.

Editor's note 20:

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. 

Editor's note 21:

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.

Editor's note 22:

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.

Editor's note 23:

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.

Editor's note 24:

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.

Editor's note 25:

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.

Editor's note 26: 

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. (Refer: 16-277MR) 

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Last updated: 01/06/2016 12:00