Mr McMaster was flanked by supporters, including his brother Adrian McMaster, as he sat in the back row of the courtroom. Before the hearing began, he was asked to turn off his phone by his own lawyers after taking a call in court.
ASIC alleges Dover misled and deceived clients by asking them to agree to the client protection policy, which ASIC alleges stripped Dover’s clients of most of their rights including any recourse against Dover or one of its clients as a result of misconduct.
ASIC also alleges Mr McMaster was knowingly concerned in the conduct of Dover in relation to the client protection policy.
The corporate watchdog laid out its case against Dover and Mr McMaster during the first day of the two-day trial on Wednesday.
“If we prove our case against Dover the rest will follow, that’s abundantly clear,” Bernard Quinn, QC, counsel for ASIC, told the court.
Dover’s protection policy stated in its introduction section that it was “designed to ensure that every Dover client get [sic] the best possible advice and the maximum protection available under the law”.
However, ASIC alleges it was designed to burden clients with the potential liability for losses caused by negligent or inappropriate advice.
Mr Quinn said the ASIC case centred on the introductory statement because it included “the mis-statement that the clauses provide the maximum protection under the law”.
“It was inaccurate. An inaccurate document is a false document. And we would say a false document is likely to mislead or deceive,” Mr Quinn said.
“It was drafted in language that purports to tell clients, whether sophisticated or… mum and dad investors that they are covered by the full power of the law.
“It is misleading and deceptive and is likely to mislead and deceive every person who received it.”
In late June, Dover closed its doors after ASIC accepted a court enforceable undertaking that the firm would cease operating and apply to cancel its Australian Financial Services licence. Mr McMaster also undertook to remove himself permanently from the financial services industry.
The court heard on Wednesday that documents from Dover showed the policy was introduced to Dover’s clients in 2015, to resolve the “messy” additional requirements on Dover under the Corporations Act.
Mr Quinn said Dover documents showed the company telling clients of its planners that ASIC had expressed concerns about insurance policy churning by planners. Insurance policy churning is a practice by planners where they roll clients into new insurance policies to receive additional commissions. Mr Quinn said the document stated Dover was worried about churning and did not allow it.
Yet Mr Quinn said the client protection policy was amended to state that Dover’s practices “do not comprise churning and are in your best interests and are appropriate for you”.
ASIC is seeking declarations from the court that Dover and Mr McMaster breached the Corporations Act by misleading its clients and penalties that the court deems appropriate.
Dover and Mr McMaster are defending the case. Both are represented by high profile silk Jeff Gleeson, QC.
The case continues.
Sarah Danckert is a business reporter.