ASIC v Plymin and Ors (No 2) - [2002] VSC 356

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 7748 of 2000

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION	Plaintiff
v
PLYMIN AND ORS	Defendant

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	21-23 August 2002
DATE OF JUDGMENT:	26 August 2002
CASE MAY BE CITED AS:	ASIC v Plymin and Ors (No 2)
MEDIUM NEUTRAL CITATION:	[2002] VSC 356

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corporations – proceeding for civil penalty order – application for stay of proceeding on basis that decision to commence proceeding was a nullity– whether ASIC entitled to have regard to statements made in examinations under Australian Securities and Investments Commission Act 1989 (Cth) s.19 for the purpose of deciding to commence civil penalty proceeding

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	N.J. Young QC with P. Clarke SC, P. Crutchfield, and E. Heerey	ASIC
For the First Defendant	In person
For the Second Defendant	M. Wyles	Tress Cocks & Maddox
For the Third Defendant	L. Glick SC with A. Young	Phillips Fox

HIS HONOUR:

This is an application by the second defendant pursuant to a summons filed 16 August 2002 that this proceeding be stayed, or otherwise struck out on the basis that the plaintiff, ASIC (“the Commission”), in making the decision to commence this proceeding acted beyond power. The second defendant withdrew an application for leave to amend the summons by adding two further applications for relief. These withdrawn applications firstly sought in the alternative that the proceeding be struck out as an abuse of process on the basis that at the time of issuing this proceeding the Commission had no reasonable basis to believe that it could succeed in obtaining a pecuniary penalty order against the second defendant and secondly sought that the Commission be restrained from using any material in this proceeding which was obtained by the Commission after 29 May 2000 during the investigation commenced pursuant to s.13 of the ASC Act 1989 (Cth) and any information obtained by the Commission in utilisation of the investigation information. As these proposed amendments to the summons were withdrawn it is unnecessary to say any more about them.

The background to this application is briefly as follows. The principal proceeding before the Court is an insolvent trading proceeding against three directors of the Water Wheel group of companies (“Water Wheel”) in which the Commission claims civil penalties, compensation and disqualification orders. On 29 May 2000 the Commission commenced an investigation into the affairs of Water Wheel and into suspected contraventions of s.588G of the then Corporations Law, as in operation in 1999 and early 2000. Under s.1317DA of the Law, s.588G was a civil penalty provision. There is in evidence a copy of the determination made pursuant to s.13 of the Australian Securities and Investment Commission Act 1989 (Cth) (“ASIC Act”) to carry out this investigation. In the course of the investigation, the Commission gathered evidence from a range of potential witnesses, including the administrators of the Water Wheel companies…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2002] VSC 356
Decision Date: 26 August 2002

CaseChat Overview and Summary

In this matter, the Australian Securities and Investments Commission (ASIC) brought an action against several defendants seeking civil penalty orders for breaches of the Corporations Act. The defendants challenged the validity of ASIC's decision to commence proceedings, arguing that it was based on an improper consideration of statements made during examinations under the Australian Securities and Investments Commission Act 1989 (Cth). The case was heard in the Federal Court of Australia. The central legal question was whether ASIC was entitled to consider statements made in examinations under section 19 of the Australian Securities and Investments Commission Act 1989 (Cth) when deciding to initiate civil penalty proceedings.

The court examined the relevant provisions of the Australian Securities and Investments Commission Act 1989 (Cth) and the principles governing the admissibility of evidence in administrative proceedings. The defendants argued that ASIC's reliance on section 19 statements rendered the decision to commence proceedings unlawful. The court considered whether ASIC's use of such statements in its decision-making process was consistent with the statutory framework and procedural fairness. Ultimately, the court found that ASIC was indeed permitted to take into account statements made in examinations under section 19 when deciding to commence civil penalty proceedings. The court held that this did not constitute an unlawful or unfair process, as the statutory framework allowed for such considerations within the bounds of procedural fairness.

Consequently, the court dismissed the application for a stay of proceedings, affirming that ASIC's decision to initiate the civil penalty action was lawful and valid. The reasoning was grounded in the statutory authority provided to ASIC and the absence of any procedural defect in the decision-making process. The defendants' challenge to the validity of the proceedings was therefore unsuccessful. The case underscored the importance of adhering to statutory mandates and ensuring procedural fairness while exercising powers under the Australian Securities and Investments Commission Act 1989 (Cth).

Orders