AUSTRALIA Law and Practice Contributed by: Joachim Delaney and Ranjani Sundar, HFW
amounted to phoenix activity, was found to be involved in the contravention through his advi - sory conduct. 3.2 Claims Against Ultimate Beneficial Owners Generally, a claim may be brought against the ultimate beneficial owner of a company where it can be shown that a company was set up as a sham and/or manifested the alter ego of a director, majority shareholder or other benefi - cial owner of the company, to perpetrate a fraud (Australian Securities and Investments Com - mission v Caddick (2021) 395 ALR 481; Ford (in his capacity as Commissioner for Fair Trad - ing) v TLC Consulting Services Pty Ltd [2011] QSC 233; Artedomus (Aust) Pty Ltd v Del Casale (2006) 68 IPR 577; [2006] NSWSC 146; Smith v Hancock [1894] 2 Ch 377). There is no fixed test to determine when such a claim may succeed; rather, each case turns on its facts. Such a claim requires the piercing of the corporate veil, which courts have been willing to do if it can be shown that the “concept of separate corporate person- ality is sought to be used to defeat public con - venience, or to justify wrong, or to protect fraud, or to defend crime” (Ace Property Holdings Pty Ltd v Australian Postal Corporation [2011] 1 Qd R 504; [2010] QCA 55 at [88]). It is also possible for the corporate veil to be pierced in instances where a court “can see that there is in fact or in law a partnership between companies in a group” (Pioneer Concrete Services Ltd v Yelnah Pty Ltd and Others (1986) 5 NSWLR 254, 267) or where there is “a finding by unrebutted infer - ence that one of the reasons for the creation of the intervening company was to evade a legal or fiduciary obligation” (Pioneer Concrete Services Ltd v Yelnah Pty Ltd and Others (1986) 5 NSWLR 254, 267; Gilford Motor Company Ltd v Horne [1933] Ch 395).
For instance, in Australian Securities and Invest - ments Commission v Caddick (2021) 395 ALR 481, the Federal Court of Australia found that a company had contravened Section 911A of the Corporations Act 2001 (Cth) by carrying on a financial services business and issuing a finan - cial product in the absence of holding an Aus - tralian Financial Services licence. The Federal Court further held that the actions of the com - pany were also attributable to the sole director, shareholder and secretary of the company. This was because the evidence established that the company was used as a sham to disguise the sole director’s fraudulent Ponzi scheme; particu - larly given that the actions of the company were carried out at the sole director’s behest, the sole director “took all the necessary steps, provided the advice and ran the scheme” and the funds provided by the company’s investors “were not applied to the purchase of share portfolios on their behalf but were transferred to accounts in the name of or associated with (the sole direc- tor) and used to fund her lifestyle and/or... to repay investors who redeemed their investments in part or in whole” (Australian Securities and Investments Commission v Caddick (2021) 395 ALR 481, 554 [282]–[283]). 3.3 Shareholders’ Claims Against Fraudulent Directors Shareholders, former shareholders, or persons entitled to be registered as members may, with leave of the court, bring a claim on behalf of the company against the directors, who exercise control over the company, through a statutory derivative action under Part 2F.1A of the Cor - porations Act 2001 (Cth). A statutory derivative action is brought by shareholders on behalf of the company for wrongs that have been done to the company by the directors, and where it is probable that the company itself will not bring proceedings. This may occur where the direc -
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