Australian Securities and Investment Commission v Keech and 3 Ors

[1999] NSWSC 683

CITATION:	Australian Securities and Investment Commission v Keech & 3 Ors [1999] NSWSC 683
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	3021/99
HEARING DATE(S):	06/07/99
JUDGMENT DATE:	6 July 1999
PARTIES :	Australian Securities and Investments Commission (Plaintiff) Ian Norman Keech (First Defendant) Tekcorp Coating Systems Limited ACN 078 792 140 (Second Defendant) Securitek Holdings Pty Limited ACN 078 792 122 (Third Defendant) Tekcorp Specialist Coating Systems Pty Limited ACN 083 857 238 (Fourth Defendant)
JUDGMENT OF:	Santow J

COUNSEL :	R Sofroniou (Plaintiff) ex parte
SOLICITORS:	Australian Securities & Investments Commission (Plaintiff) ex parte
CATCHWORDS:	CORPORATIONS — Ex parte application to restrain breach of s600 of Corporations Law by defendant managing a company who had been a director of more than one liquidated company paying less than 50 cents in the dollar — Extent of enquiry by court — Relevant considerations in granting injunction — Should injunction be operative immediately.
ACTS CITED:	Corporations Law s91A, s600, s1324
CASES CITED:	Didovich v ASIC (1998) 29 ACSR 122 Iliopoulos v ASC (1997) 15 ACLC 1512 Laycock v Forbes (1997) 150 ALR 186; 25 ACSR 659
DECISION:	Interim injunction granted

REVISED — 9 July, 1999
IN THE SUPREME COURT
OF NEW SOUTH WALES
IN EQUITY

SANTOW J

No. 3021/99
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
IAN NORMAN KEECH
First Defendant
TEKCORP COATING SYSTEMS LIMITED ACN 078 792 140
Second Defendant
SECURITEK HOLDINGS PTY LIMITED ACN 078 792 122
Third Defendant
TEKCORP SPECIALIST COATING SYSTEMS PTY LIMITED ACN 083 857 238
Fourth Defendant
JUDGMENT — ex tempore

6 July 1999
1 The present application is for orders in terms of a Summons brought on an ex parte basis by ASIC for which leave has been given to be filed in Court to-day. The orders sought are based upon ASIC having issued a notice under s600(3) of the Corporations Law prohibiting the First Defendant from “managing” a corporation as that term is defined in s91A of the Corporations Law, for a period not exceeding five years. This can be done where, as here, the Defendant was a director of more than one liquidated company which, according to the liquidator’s report, paid less than 50 cents in the dollar to unsecured creditors, within the preceding seven years. This is so long as the person concerned was in office at any time during the period of twelve months ending on the day the winding-up began. ASIC has satisfied me that prima facie the requirements of s600 were satisfied including the procedural ones. In particular I am satisfied that the notice in writing under s600(2) was given to the First Defendant who exercised the opportunity afforded to him to attempt to show cause why the relevant notice should not be served upon him. The orders sought are by way of injunctive restraint under s1324 of the Corporations Law of an interim nature directed to preventing the First Defendant from continuing to manage in terms of s91A of the Corporations Law. 2 This is in circumstances where on the evidence before me in the form of an affidavit of Mr Ivory dated 5 July 1999 it is clear that the First Defendant is in fact managing the corporations there identified, being the Second, Third and Fourth Defendants. 3 Before me is the report of a delegate of ASIC Mr Reynolds, dated 16 October 1997 (“INK1”) followed by the notice of prohibition to which I have earlier made reference (“INK2”). ASIC’s submission is that when the Court is satisfied that the conditions laid down by s600 have prima facie been fulfilled for the issuance of what is called a s600 notice prohibiting a person from managing a corporation, the Court in giving injunctive relief is not required to look further at whether there might be grounds for challenging that notice. This is more particularly where the grounds for challenge would be not to this Court ordinarily but under s1317B of the Corporations Law to the Administrative Appeals Tribunal; see Iliopoulos v ASC (1997) 15 ACLC 1512; Laycock v Forbes (1997) 150 ALR 186; 25 ACSR 659. That may be so in general terms. But the Court does need to consider, particularly when an application for enforcement is brought on an ex parte basis, whether the considerations which led ASIC to issue the relevant s600 notice appear congruent with the requirements of s600 of the Corporations Law. The source for doing so in the present case is the delegate’s report and the affidavit of Mr Ivory. 4 To look further as to the kind of matters that might be raised before the AAT should not ordinarily be necessary. In the present case that conclusion is fortified by the fact that an application to the AAT by the First Defendant was discontinued on 3 July 1998. Certainly a necessarily broad consideration of Mr Reynold’s decision as ASIC delegate culminating in paras 5.16 and 5.17 of his report, reveals there were aspects of Mr Keech’s conduct earlier identified which support the action taken by ASIC in issuing the notice, congruently with s600. Thus he refers in para 5.16 and earlier to Mr Keech causing the transfer of assets from a company in liquidation to another company which subsequently went into liquidation. In para 5.17 he refers to a failure to pay group tax in the case of Lakeview Kitchen (Sales) Pty Ltd, a company controlled by Mr Keech, which subsequently went into liquidation. Those aspects in turn led to the determination that Mr Keech “demonstrated a serious lack of commercial morality” in respect to the debt to the Australian Taxation Office (5.16.3). He also exhibited conduct, described in 5.17.13, as demonstrating “Mr Keech’s dishonesty toward the company’s preferential creditor” (5.17.5). It is not of course appropriate for me to express any view in relation to those findings beyond noting that they have not been subsequently challenged and that they support ASIC in now seeking enforcement of its notice. 5 This then provides a background of concern about Mr Keech simply disregarding the prohibition upon his managing corporations where the conditions of s600 have prima facie been fulfilled. Mr Keech did not seek the leave of the Court to undertake such management, as required by s600(5); see most recently Didovich v ASIC (1998) 29 ACSR 122 for how that discretion is to be exercised by a court. Had he had proper grounds, he could readily have made application under s600(5) and chose not to do so. In those circumstances, the orders sought on an interim basis ought to be made in the public interest. I have considered whether they should be suspended in operation for a short time. But having regard to the matters earlier noted I consider they should be made operative forthwith, though with leave to apply on reasonable notice.

ORDERS

6    I make the following orders:

(1) The First Defendant is, without leave of the Court, prohibited from continuing to manage, or take any part in or be in any way (directly or indirectly) concerned in managing, the Second, Third and/or Fourth Defendants.
(2) The First Defendant is, without leave of the Court, prohibited from dealing with or disposing of any assets of the Second, Third and/or Fourth Defendants or any funds provided by customers of the Second, Third and/or Fourth Defendants.
(3) the First Defendant is, without leave of the Court, prohibited from causing, or allowing, the Second, Third and/or Fourth Defendants to incur any further liabilities, from the date hereof.
(4) The Plaintiff is given leave to give any bank, building society or other financial institution with which the Second, Third and/or Fourth Defendants or any of them conduct an account or accounts, notice of these Orders.
(5) Orders (1), (2) and (3) shall not restrain the doing of anything which is not “management” or “managing” within the meaning of s91A of the Corporations Law .
(6) That the time for service be abridged to 11 am on 7 July 1999.
(7) Leave to apply on reasonable notice.
(8) I direct the matter come back before the Corporations Judge at 10 am 12 July 1999.

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Last Modified: 07/09/1999