The court found that Cycclone falsely claimed shares in the company were an investment in proven technology, and that Nugent and Cycclone had presented a misleading business plan. ASIC gained injunctions stopping Cycclone from engaging in misleading or deceptive conduct by claiming the engine worked. Cycclone was also stopped from claiming that its shares would be an investment in proven technology. The Queensland Court of Appeal confirmed in 2010 that Nugent was guilty of misleading and deceptive conduct over the Cycclone Magnetic Engine, holding that the magnetic engine did not and could not work.
Nugent is apparently unabashed and is reportedly promoting another company with similarly 'innovative' technology. He's had issues with unhappy investors and regulators prior to claims about the engine.
In Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc & Ors [2009] QSC 58 ASIC argued that the defendants in seeking funds had referred to an invention centred on "using permanent magnets in a configuration that supplies mechanical power on demand". The defendants made representations that the invention works. ASIC argued that the representations were misleading or deceptive (or likely to mislead or deceive) because neither the Invention nor the Prototype (a) is scientifically feasible,(b) can move under its own power, or (c) can be a source of power. No great surprises there, either for people with a basic understanding of mechanics or an interest in the history of people promoting perpetual motion devices. ASIC further argued that the representations were likely to mislead a reasonable person into the assumption that, by acquiring shares in Cycclone, the person was investing in a proven technology, that shares in Cycclone were of a particular quality (ie an investment in a proven technology).
The court noted that Cycclone "has no (and has not applied for any) patents relating to the engine", which supposedly
works wholly and solely with the attraction repulsion of permanent magnets. The objective of it is to produce an engine that doesn't require external input, either electrical or fuel. It's so that the engine runs purely on the attraction and repulsion of permanent magnets. In its geometric configuration that does not try to challenge perpetual motion but to use mechanical advantage.The court endorsed an expert's assessment that creation of an engine based on permanent magnets to supply mechanical power on demand, without the need of external fuel input, "could not be supported scientifically and that the development of an engine of this type was not scientifically feasible".
The Court placed that in context with the comment that
For hundreds of years people have been investing time, money and effort in attempts to create a perpetual motion machine. Even though such a machine would violate either or both of the first and second laws of thermodynamics, there has been a continual stream of these “inventions” since at least the twelfth century. Coincident with that has been the quest by the “inventors” for funding to support their creations. There are many examples of funds being raised to sustain these endeavours. There have also been many who have been willing to point out the impossibility of these attempts, sometimes with scathing condescension. On other occasions the would-be inventor is met with bureaucratic intolerance.
One of the ways in which it has been claimed that a machine can be created, which will require no external fuel input, is through the applied use of very strong magnets. That is the case here. In England the subject was studied during the reign of Queen Elizabeth, with a text on the properties of magnets being published in 1600. Bishop John Wilkins, in his book Mathematical Magick,[5] discusses the ”difficulty” of achieving perpetual motion, and considers in detail a device consisting of two tilted ramps, an iron ball, and a magnetic lodestone fastened at the top. He determined that the device could not work but concluded: “So that none of all these magnetical experiments which have been as yet discovered, are sufficient for the effecting of a perpetual motion, though these kind of qualities seem most conducible unto it; and perhaps, hereafter, it may be contrived from them.” The interaction among magnets, electricity and the generation of power has been investigated by giants of the field: Coulomb, Ampere, Faraday and Tesla.
In this case, the applicant (‘ASIC’) says that the respondents have, in promoting a machine said to run solely on the power of magnets, engaged in misleading and deceptive conduct and have otherwise breached legislative provisions regulating fund raising by corporations. That simple description might lead one to the quick conclusion that the promotion of a “perpetual motion” machine must fall into the ‘misleading and deceptive’ basket, but looks can be deceptive in more than one way and the statutory remedies are not to be employed without careful scrutiny of what a promoter actually says and does.
The provisions of the Corporations Act 2001 which deal with misleading and deceptive conduct are not designed as a complete shield to protect individuals against their own avarice or cupidity. Just as people will continue to play games of chance in casinos (knowing that the odds are in favour of the house) or buy tickets in lotteries (knowing that the chance of winning is one in many millions) so people will continue to chance their money in investments which, to others, appear far too risky. They sometimes adopt the attitude of one of the deponents whose affidavit was relied upon by ASIC – they see the investment as a bit of a gamble.The Court of Appeal in Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc & Ors [2010] QCA 71 agreed that there was a difference between risk and misrepresentation, dismissing the appeal by Nugent and Cycclone.
