FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Helou [2019] FCA 1634
File number: VID 682 of 2019 Judge: BEACH J Date of judgment: 4 October 2019 Catchwords: CORPORATIONS – multiple regulatory enforcement proceedings – breaches of duties of directors and officers – ASIC proceedings against chief executive officer and chief financial officer for disqualification orders – earlier ASIC proceedings against corporate entity – separate ACCC proceedings against corporate entity and officers for disqualification orders – application for permanent stay of proceedings – overlap of proceedings – vexatious and oppressive proceedings – administration of justice – abuse of process – applications dismissed Legislation: Australian Consumer Law ss 18, 21, 29, 224, 248
Australian Securities and Investments Commission Act 2001 (Cth) ss 1, 12A, 12DA, 13, 19, 102
Competition and Consumer Act 2010 (Cth) ss 26, 155, Sch 2
Corporations Act 2001 (Cth) ss 180, 206C, 206E, 674, 675, 1041H, 1317F, 1317G, 1317J, 1317N, 1349
Federal Court of Australia Act 1976 (Cth) ss 33M, 33V
Cases cited: Australian Competition and Consumer Commission v Swishette Pty Ltd [2018] FCA 55
Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256
Blatch v Archer (1774) 98 ER 969
Johnson v Gore Wood & Co [2002] 2 AC 1
Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427
Ridgewayv The Queen (1995) 184 CLR 19
Rogers v The Queen (1994) 181 CLR 251
Rozenblit v Vainer (2018) 262 CLR 478
Strickland v Commonwealth Director of Public Prosecutions (2018) 93 ALJR 1; 361 ALR 23
Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507
Date of hearing: 13 September 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 303 Counsel for the Plaintiff: Mr JWS Peters AM QC and Ms N Moncrief Solicitor for the Plaintiff: HWL Ebsworth Lawyers Counsel for the First Defendant: Mr M Borsky QC and Mr C Moller Solicitor for the First Defendant: Corrs Chambers Westgarth Counsel for the Second Defendant: Mr RG Craig and Mr HC Whitwell Solicitor for the Second Defendant: Minter Ellison ORDERS
VID 682 of 2019 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: GARY HELOU
First Defendant
BRADLEY HINGLE
Second Defendant
JUDGE:
BEACH J
DATE OF ORDER:
4 OCTOBER 2019
THE COURT ORDERS THAT:
1.The first defendant’s application for a permanent stay of these proceedings be dismissed.
2.The first defendant’s costs of and incidental to his application be his costs in the cause and otherwise there be no order as to costs.
3.The second defendant’s application for a permanent stay of these proceedings be dismissed.
4.The second defendant’s costs of and incidental to his application be his costs in the cause and otherwise there be no order as to costs.
Note: Entry of orders is…
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- AGLC
- ASIC v Helou [2019] FCA 1634
- Case
- [2019] FCA 1634
- Decision Date
CaseChat Overview and Summary
The present case concerns proceedings initiated by the Australian Securities and Investments Commission (ASIC) against the chief executive officer and chief financial officer of the Murray Goulburn group of companies, with the primary aim of obtaining disqualification orders. This matter is before the Federal Court of Australia, which must determine whether the proceedings should be permanently stayed. The defendants have argued that the proceedings are vexatious, oppressive, and an abuse of process, as well as being redundant due to overlapping proceedings with the Australian Competition and Consumer Commission (ACCC). The court must decide if ASIC's delay in commencing the present proceeding was justified and whether the proceedings should be stayed on the grounds of vexation, oppression, and abuse of process.
The court has examined the defendants' applications for a permanent stay of the proceedings, considering the overlap between the ASIC and ACCC proceedings, as well as ASIC's delay in initiating the present action. The court found that ASIC's delay in starting the proceedings had the potential to disrupt the trial and disposition of the Webster class action. The court emphasised the importance of regulators acting expeditiously when class actions are involved, as the regulatory action must be prioritised to avoid prejudicing natural persons in their defences. The court further noted that ASIC's perceived pragmatism in delaying the proceedings to save expenses or resources was not sufficient justification for the delay. The court found that ASIC's delay was less than desirable and predictably led to the defendants' applications for a permanent stay.
In conclusion, the court dismissed the defendants' applications for a permanent stay of the proceedings. Although the court normally awards costs to the prevailing party, in this case, the court considers it just that ASIC should not receive its costs due to its less than desirable approach. Instead, the court orders that the defendants' costs of and incidental to their applications be treated as costs in the cause. This decision ensures that the defendants' costs position is protected to some extent, while also acknowledging ASIC's role in initiating the proceedings. The court's final orders include dismissing the defendants' applications for a permanent stay and setting the defendants' costs as costs in the cause, with no order as to costs for ASIC.
The court has examined the defendants' applications for a permanent stay of the proceedings, considering the overlap between the ASIC and ACCC proceedings, as well as ASIC's delay in initiating the present action. The court found that ASIC's delay in starting the proceedings had the potential to disrupt the trial and disposition of the Webster class action. The court emphasised the importance of regulators acting expeditiously when class actions are involved, as the regulatory action must be prioritised to avoid prejudicing natural persons in their defences. The court further noted that ASIC's perceived pragmatism in delaying the proceedings to save expenses or resources was not sufficient justification for the delay. The court found that ASIC's delay was less than desirable and predictably led to the defendants' applications for a permanent stay.
In conclusion, the court dismissed the defendants' applications for a permanent stay of the proceedings. Although the court normally awards costs to the prevailing party, in this case, the court considers it just that ASIC should not receive its costs due to its less than desirable approach. Instead, the court orders that the defendants' costs of and incidental to their applications be treated as costs in the cause. This decision ensures that the defendants' costs position is protected to some extent, while also acknowledging ASIC's role in initiating the proceedings. The court's final orders include dismissing the defendants' applications for a permanent stay and setting the defendants' costs as costs in the cause, with no order as to costs for ASIC.
Orders
Orders of the court
1. The first defendant’s application for a permanent stay of these proceedings be dismissed.
2. The first defendant’s costs of and incidental to his application be his costs in the cause and otherwise there be no order as to costs.
3. The second defendant’s application for a permanent stay of these proceedings be dismissed.
4. The second defendant’s costs of and incidental to his application be his costs in the cause and otherwise there be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
For the following reasons, I reject the defendants’ applications. Let me begin with some background.(a) Background As I have said, the present proceeding concerns events that occurred in the Murray Goulburn group of companies between 1 May 2015 and 27 April 2016 which it is said constituted misleading or deceptive conduct and a breach of market disclosure obligations. And these events have been the subject of multiple proceedings and investigations, in the context of which ASIC commenced the present proceeding. The substratum of alleged facts on which this proceeding, the earlier ASIC proceeding and the concluded ACCC proceeding all rest centres on events at MG and MGRE, the trustee of the MG Unit Trust, in the financial year ending 30 June 2016 (FY16). Now as MG is an unlisted disclosing entity whereas MGRE is a listed disclosing entity, in some instances the alleged conduct would if proved sound in contraventions of different provisions of the Corporations Act 2001 (Cth). But the underlying alleged facts are not substantially different. Let me begin with a relevant chronology.Chronology On 27 April 2016, MG and MGRE released an ASX announcement in which MG announced an “expected NPAT [net profit after tax] of between $39 million to $42 million” for FY16. This was a downgrade of more than $20 million from its previous $63 million earnings guidance given on 29 February 2016. In mid May 2016, a class action was commenced by Mr John Webster on behalf of unit holders of the MG Unit Trust against MG and MGRE and their directors including Mr Helou, although not Mr Hingle, seeking compensation for alleged contraventions of the Corporations Act (Webster class action). The contraventions were alleged to arise by reason of the issue of a defective product disclosure statement (PDS) and market announcements made by MGRE and the failure to correct misleading statements contained in them. The Webster class action had originally been instituted in the Supreme Court of Victoria but was later transferred to the Federal Court of Australia. On 25 August 2016, ASIC commenced an investigation under s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) into the conduct of MG, MGRE and their directors and officers in relation to the circumstances disclosed in MG’s and MGRE’s ASX announcement on 27 April 2016. Between September 2016 and April 2017, ASIC conducted examinations under s 19 of the ASIC Act. On 16 and 17 March 2017, Mr Hingle was examined by ASIC under s 19 of the ASIC Act. On 21 and 24 March 2017, Mr Hingle was examined by the ACCC under s 155 of the Competition and Consumer Act 2010 (Cth) (CCA) in relation to matters that later became the subject of the ACCC proceeding. On 20, 21 and 22 March 2017, ASIC conducted examinations of Mr Helou under s 19 of the ASIC Act. On 5 and 6 April 2017, the ACCC examined Mr Helou under s 155 of the CCA. I should note that at the s 19 examinations Mr Helou and Mr Hingle were directed not to disclose to any person the nature of the questions asked during their examination, their answers to those questions or the fact that they had provided documents in the course of their examination. These directions applied until 30 June 2017, although they were later extended.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Second, ASIC’s substantial delay in commencing the present proceeding had the tendency to disrupt the trial and disposition of the Webster class action. As I say, in the context where there are class actions on foot, it is incumbent on a regulator to move with due expedition absent good reason not to do so, so that if necessary the regulatory action can be disposed of first where natural persons are involved across both the regulatory action and the class action and penalty privilege questions come into play. It should go without saying that in such a circumstance the regulatory action must go first. Let me demonstrate this with a reductio ad absurdum technique. If the class action went first, the natural person defendant would be irreparably prejudiced under either of the apparent logic pathways. To properly defend the class action he would need to waive the penalty privilege, which would cause prejudice to him in the later regulatory proceeding. But if he maintained the privilege in the class action to avoid later prejudice in the regulatory proceeding, he would be prejudicing the proper conduct of his defence in the class action. So, under either logic pathway the logic of the class action going first is negated. QED: the regulatory action must go first. But if there is no penalty privilege question, a joint trial can be entertained. But to preserve that realistic option, the regulator should proceed in a timely fashion so that the necessary coordination can occur. In sum, whether or not there is a penalty privilege question, the regulator should proceed expeditiously where there are one or more class actions on foot. In the present context ASIC failed to do so. It has sought to justify its delay by the perceived pragmatism of a “wait and see” approach concerning the outcome of the ACCC proceeding in terms of saving expense or minimising the use of resources. But there were broader interests and issues involved, including the desirability of avoiding the two unsatisfactory aspects that I have just discussed.(d) Conclusion For the above reasons, the defendants’ applications will be dismissed. Now normally costs would follow the event, but in the circumstances I propose to modify that position. ASIC’s less than desirable approach has predictably generated the defendants’ applications. I consider it just that ASIC should not have its costs but that the defendants’ costs position be protected to some extent by treating their costs as costs in the cause.
Ratio Decidendi
Legal Principle Established
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