The Federal Court has given the investors the greenlight to pursue a class action against Money For Living and its directors following an application by the Australian Securities and Investments Commission.
ASIC’s application sought to assist purchasers of products offered by MFL and MFLPH in obtaining clear determinations of law in relation to the nature of the financial interest that MFL offered to purchasers and the way in which it was promoted.
The decision will pave the way for investors who have been patiently waiting to pursue a class action against Money For Living (administrators appointed), MFL Property Holdings Pty Ltd (administrators appointed) and their directors, Stephen O’Neill, Gary O’Neill and Jolanta Olszewski.
Investors began to realise there was trouble in MFL and MFLPH when the companies were placed into voluntary administration on September 26, 2005 with George Georges and Peter McCluskey of Ferrier Hodgson being appointed as administrators.
On October 20, 2005, when ASIC commenced civil proceedings in the Federal Court seeking declarations that false and misleading representations were made by MFL, MFLPH and the companies directors, Stephen O’Neill, Gary O’Neill and Jolanta Olszewski.
ASIC alleged that the MFL made false and misleading representations in various agreements and materials, including in communications to 117 vendors who sold their homes under what MFL described as “a unique system that allows people (generally over 55) to access the equity in their home”.
The 117 vendors sold their homes to MFL or MFLPH since September 17, 2004 and the total value of the properties is approximately $27.8 million. About 71 of those properties were on sold to third party purchasers.
In this latest application, ASIC argued that the product offered by MFL was a financial product as defined under the Corporations Act and the ASIC Act, for the purposes of provisions relating to misleading and deceptive conduct.
In support of ASIC’s application, Justice Finkelstein found that:
• MFL offered the vendors a financial product under the general definition of the law (ss763B(a)(i) Corp Act & ss12BAA(4)(a)(i) ASIC Act);
• MFL made false and misleading statements in the brochure and on the website; and
• MFL made false and misleading statements in the Agreements with the vendors.
ASIC’s executive director of enforcement Jan Redfern said the judgment is significant in that it confirm ASIC’s view that the products offered by MFL were financial products or financial services.
“The clarification of the legal position will assist elderly people who purchased MFL’s products in pursuing action against the companies and its directors.
“Significantly, His Honour also found that the vendors life tenancies are secure, that is their tenancies are “guaranteed’ to survive any adverse claimade. His Honour based his conclusion on s.42(2)(e) of the Transfer of Land Act 1958 (Vic) and the equivalent provision in the Torrens legislation in other states,” she added.
The 117 vendors who purchased MFL’s product are currently being represented by the private law firm of Slater & Gordon, Russell Kennedy and Dellios West in three related proceedings, which have been issued in either the Federal Court of Australia or the Supreme Court of Victoria.
Pursuant to section 12GG ASIC Act 2001, the findings of fact by Justice Finkelstein may be used as evidence in these related proceedings.
“ASIC also welcomes clarification by His Honour as to what constitutes a financial product or service. It will assist both ASIC and third parties in pursuing future actions in relation to similar products,” Redfern added.
ASIC has also commenced criminal proceedings against Stephen O’Neill and Gary O’Neill.
Stephen O’Neill is charged with four counts of obtaining financial advantage by deception, four counts of dishonest use of position as an officer of a corporation and two counts of managing a corporation while disqualified.
Gary O’Neill is charged with four counts of obtaining financial advantage by deception and seven counts of dishonestly using his position as a director of a corporation.
ASIC alleges that Stephen O’Neill and Gary O’Neill obtained mortgages from a financier totaling almost $1 million dollars, by submitting loan applications that failed to disclose the life tenancies attached to the mortgaged properties.
The O’Neill brothers bail has been extended on their own undertaking and the matter is listed for a committal hearing in March 2007. The charges are being prosecuted by the Commonwealth Director of Public Prosecutions.
By Adam Parsons
