This article is from the Australian Property Journal archive
Henry Kaye and his property education company, National Investment Institute, yesterday once again earned the wrath of the Australian Securities and Investments Commission in the Federal Court when the court issued firm directions in new proceedings brought by ASIC against Kaye and NII. The proceedings arose from conduct by Mr Kaye and NII following ASIC’s acceptance of an enforceable undertaking (EU) from Mr Kaye, NII, Novasource Consulting Pty Ltd and Mr Alan Meagher on 30 July 2003. Neither Novasource Consulting Pty Ltd nor Mr Meagher are parties to the new proceeding.
ASIC alleged that NII and Mr Kaye have breached the compensation provisions of the EU. These provisions provide for the payment of compensation to people who paid money to attend courses conducted by NII, as a result of having relied on statements that courses or products were approved by ASIC (the ASIC approval statement).
ASIC’s concerns relate to allegations that the defendants told potential refund claimants that:
• a refund can only be obtained under the compensation provisions of the EU if the claimant can prove that an ASIC approval statement (as defined in the EU) was the sole factor that induced him/her to enroll in the courses and seminars offered by NII;
• a claimant for a refund under the compensation provisions of the EU will be required to swear an affidavit, produce supporting documentation and be cross-examined by a Queen’s Counsel retained by NII, and will go to jail for any false statement;
• that an ASIC approval statement only appeared in one brochure distributed by NII and was alleged by ASIC in the original proceeding to have been made by only one of NII’s authorised representatives and on only one occasion;
• the Court made a finding in the original proceeding that the original defendants had not done anything wrong;
• ASIC subjected the defendants to a thorough audit which extended over a period of eight months; and
• having completed that audit, ASIC found nothing wrong with the activities of the defendants and gave the defendants a “clean bill of health”.
ASIC contends that each of these statements are misleading or deceptive, or likely to mislead and deceive potential claimants under the compensation provisions of the EU.
Yesterday, the defendants gave permanent undertakings to the Federal Court that they will not make any of these statements again.
ASIC is seeking declarations from the Court that in making these alleged statements or representations, the defendants have breached a number of sections in the ASIC Act, the Corporations Act and/or the Trade Practices Act.
ASIC is also seeking orders requiring the defendants to forward letters, in terms specified by the Court, to all potential refund claimants, and to place newspaper advertisements to correct the alleged false or misleading statements.
Further, ASIC is seeking orders about the management of the compensation process under the enforceable undertaking so as to ensure that all inquiries by claimants or potential claimants concerning the lodgement of claims and the claims process generally, are handled by an independent party (which the defendants will be required to engage), rather than by the defendants.
‘ASIC alleges Mr Kaye and NII, in making these statements to potential claimants, have not been fully complying with all the terms of the enforceable undertaking that ASIC accepted on 30 July 2003. It is important to bring these matters to the attention of the court so that, if the court finds these allegations are proven, remedial orders can be imposed quickly to ensure the compensation process in the enforceable undertaking can be completed properly’, ASIC’s Deputy Executive Director of Enforcement, Ms Jan Redfern said.
The Federal Court adjourned the hearing of the case until 2 December 2003.
