Judgment in on ASIC application against Aussie firm

By Emma Ryan|23 July 2018

The Federal Court has reached its decision on an application brought by ASIC seeking contempt findings against an Australian law firm.

Melbourne-headquartered law firm Kalus Kenny Intelex was forced to front the Federal Court after a contempt application was filed by the corporate watchdog against it, relating to a series of payments made from the firm’s trust account while acting for Eustace Senese and his son Cameron Senese, and Transcomm Global Pty Ltd (Transcomm). 

The contempt application against Kalus Kenny Intelex and all charges against Kalus Kenny Intelex were officially dismissed by Justice Mark Moshinsky late last week.

The matter came as part of ASIC’s ongoing Federal Court proceedings concerning the operation of binary option trading websites.

In its submission ASIC alleged that Kalus Kenny Intelex breached certain court orders by causing or procuring Transcomm to deal with its assets or property in contravention of the court orders.

“It is alleged that, in the period between 20 December 2016 and 6 February 2017, Kalus Kenny made five payments from its trust account on behalf of Transcomm that were not permitted by the carve-outs,” the judgment by Justice Moshinksy said.

“In respect of four of the payments, it is alleged that the payments caused the total amount applied by Transcomm to legal expenses for the proceeding to exceed the cumulative total permitted by the carve-outs, and hence the payments were in breach of the orders. In respect of one payment, it is alleged that the payment related to another legal matter, and hence was not permitted by the carve-outs, and breached the orders. The total of the five payments is $11,351.08.

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“There is no real issue that at least three, if not all five, of the five payments were not permitted by the carve-outs, and therefore involved breaches by Transcomm of the court orders. The real question is whether Kalus Kenny, as the firm of solicitors acting for Transcomm, is liable for contempt of court.”

Justice Moshinsky held that ASIC’s allegations against the firm were formulated on “two alternative bases”.

“As explained in ASIC’s written submissions: the primary charges assume that Kalus Kenny’s liability for contempt of court is essentially strict; and the alternative charges assume that some mental intent must be proved,” he said.

“Each of the alternative charges alleges that Kalus Kenny breached the court orders by causing or procuring Transcomm to deal with its assets or property in contravention of the court orders ‘knowing that to be in contravention of the Court Order”’.

“In my view, for the reasons set out below, the primary basis upon which ASIC puts its case against Kalus Kenny is inconsistent with the judgment of Drummond J in CCOM Pty Ltd v Jiejing Pty Ltd (CCOM). CCOM and the authorities to which it refers establish that a person who is not a party to the proceeding and not bound by a court order is not subject to the strict liability for contempt that applies to a person bound by a court order that is breached; an additional element of intention needs to be established.

“Further, I consider CCOM to be authority for the proposition that these principles apply to a solicitor in circumstances where the solicitor is acting for a party to a proceeding who is bound by a court order, but the solicitor is not himself or herself bound by the court order.

“It follows that I reject the primary charges brought by ASIC against Kalus Kenny. In relation to the alternative charges against the firm, it is not established that the partner responsible for the matter (or anyone else at the firm) effected the relevant payments knowing this to be in contravention of the court orders. Accordingly, the alternative charges are not established.

“… Court charges against Kalus Kenny are to be dismissed.”

While the court dismissed charges against Kalus Kenny Intelex, it held that both Eustace and Cameron Senese, and Transcomm, were guilty of contempt after they accessed and used other funds during August 2016 and February 2017, without authorisation of the court.

Submissions will be considered by the court to determine the penalty against the Seneses and Transcomm in relation to the contempt charges, with a trial posted for April next year.

Judgment in on ASIC application against Aussie firm
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