Australian Securities and Investments Commission v Banovec (No 2)

[2007] NSWSC 961

Reported Decision: (2007) 25 ACLC 1,205

New South Wales

Supreme Court

CITATION:	ASIC v Oliver Banovec (No. 2) [2007] NSWSC 961
HEARING DATE(S):	23 May 2007
JUDGMENT DATE :	31 August 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	White J
DECISION:	See para 42 of judgment.
CATCHWORDS:	CORPORATIONS – ASIC investigations – Asset preservation orders under s 1323 of the Corporations Act 2001 (Cth) – Jurisdictional basis for making orders – Held that Court has inherent jurisdiction, or jurisdiction under s 23 of the Supreme Court Act 1970 (NSW), to make an asset preservation order where power to appoint receiver under s 1323(1)(h) of the Corporations Act 2001 (Cth) is engaged. - CORPORATIONS – ASIC investigations – Orders prohibiting person from leaving Australia. - (Cth) Corporations Act 2001 s 1323 - (NSW) Supreme Court Act 1970 ss 23 and 66(4)
LEGISLATION CITED:	Corporations Act 2001 (Cth) Supreme Court Act 1970 (NSW) Federal Court of Australia Act 1976 (Cth) Companies Act 1981 (Cth) Securities Industry Act 1980 (Cth)
CASES CITED:	Australian Securities & Investments Commission v Oliver Banovec [2007] NSWSC 610 Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547 Corporate Affairs Commission (NSW) v Lombard Nash International Pty Ltd & Ors (No. 3) (1987) 12 ACLR 113 Corporate Affairs Commission v Walker (1987) 11 ACLR 884 Corporate Affairs Commission v Lone Star Exploration NL (1988) 50 SASR 24 Corporate Affairs Commission of NSW v Transphere Pty Ltd (1988) 15 NSWLR 596 Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504 Knight v FP Special Assets Ltd (1992) 174 CLR 178 PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 Australian Gas Light Company v Mine Subsidence Board (2006) 147 LGERA 433 FAR Bennion, Statutory Interpretation, 4th ed (2002) London, Butterworths Beach Petroleum NL v Johnson (1992) 9 ACSR 404 Australian Securities and Investments Commission v Burke [2000] NSWSC 694 Australian Securities and Investments Commission v Adler (2001) 38 ACSR 266 Australian Securities and Investments Commission v Rajnoch [2003] QSC 46 Australian Securities and Investments Commission v Michalik (2004) 211 ALR 285 Australian Securities and Investments Commission v Burnard [2006] NSWSC 611 Australian Securities and Investments Commission v Carey (2006) 57 ACSR 307 Australian Securities and Investments Commission v Carey (No. 14) (2007) 158 FCR 92; 25 ACLC 184 Jackson v Sterling Industries Ltd (1987) 162 CLR 612 ASIC v Eric Krecichwost & Ors [2007] NSWSC ... Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125 Dunkel v Deputy Commissioner of Taxation (1990) 27 FCR 524 Johns v Connor (1992) 35 FCR 1 Attorney-General v Great Eastern Railway Co (1880) 5 AC 473 In re Northern Ireland Human Rights Commission [2002] HRLR 35; [2002] UKHL 25 Wentworth Securities Ltd v Jones [1980] AC 74 Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292 Tokyo Mart Pty Ltd v Campbell (1988) 15 NSWLR 275 Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 R v Young (1999) 46 NSWLR 681 Nippon Yusen Kaisha v Karageorgis [1975] 1 WLR 1093; (1975) 3 All ER 282 Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyd’s Rep 509 Meagher, Gummow & Lehane, Equity: Doctrines and Remedies, 2nd ed (1985) Sydney, Butterworths
PARTIES:	Australian Securities & Investments Commission v Oliver Banovec (No. 2)
FILE NUMBER(S):	SC 1488/07
COUNSEL:	Plaintiff: Dr A Bell SC, D R Stack Defendant: M E Luitingh
SOLICITORS:	Plaintiff: ASIC - Conrad Gray Defendant: N/A

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

WHITE J

Friday, 31 August 2007

1488/07 Australian Securities & Investments Commission v Oliver Banovec (No. 2)

JUDGMENT

1 HIS HONOUR: In my reasons of 16 May 2007 (Australian Securities & Investments Commission v Oliver Banovec [2007] NSWSC 610), I concluded that orders under s 1323 of the Corporations Act 2001 (Cth) were necessary or desirable to protect the interests of persons to whom the defendant is or may be liable, or to whom he may become liable, to make monetary compensation (at [34]). I made orders restraining the defendant from leaving or attempting to leave Australia, or transmitting or causing to be transmitted any funds from Australia to any destination outside Australia. I also ordered that the defendant deliver up his passport.

2 I expressed doubt as to whether the Court had jurisdiction under s 1323 of the Corporations Act to make many of the orders sought by the Australian Securities and Investments Commission (“ASIC”), and stood the matter over for further submissions on that question.

3 Section 1323 of the Corporations Act provides:

“ 1323 Power of Court to prohibit payment or transfer of money, financial products or other property

(1) Where:
(a) an investigation is being carried out under the ASIC Act or this Act in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Act; or
(b) a prosecution has been begun against a person for a contravention of this Act; or
(c) a civil proceeding has been begun against a person under this Act;
and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an aggrieved person ) to whom the person referred to in paragraph (a), (b) or (c), as the case may be, (in this section called the relevant person ), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for financial products or other property, the Court may, on application by ASIC or by an aggrieved person, make one or more of the following orders:
(d) an order prohibiting a person who is indebted to the relevant person or to an associate of the relevant person from making a payment in total or partial discharge of the debt to, or to another person at the direction or request of, the person to whom the debt is owed;
(e) an order prohibiting a person holding money, financial products or other property, on behalf of the relevant person, or on behalf of an associate of the relevant person, from paying all or any of the money, or transferring, or otherwise parting with possession of, the financial products or other property, to, or to another person at the direction or request of, the person on whose behalf the money, financial products or other property, is or are held;
(f) an order prohibiting the taking or sending out of this jurisdiction, or out of Australia, by a person of money of the relevant person or of an associate of the relevant person;
(g) an order prohibiting the taking, sending or transfer by a person of financial products or other property of the relevant person, or of an associate of the relevant person:
(i) from a place in this jurisdiction to a place outside this jurisdiction (including the transfer of financial products from a register in this jurisdiction to a register outside this jurisdiction); or
(ii) from a place in Australia to a place outside Australia (including the transfer of financial products from a register in Australia to a register outside Australia);
(h) an order appointing:
(i) if the relevant person is a natural person—a receiver or trustee, having such powers as the Court orders, of the property or of part of the property of that person; or
(ii) if the relevant person is a body corporate—a receiver or receiver and manager, having such powers as the Court orders, of the property or of part of the property of that person;
(j) if the relevant person is a natural person—an order requiring that person to deliver up to the Court his or her passport and such other documents as the Court thinks fit;
(k) if the relevant person is a natural person—an order prohibiting that person from leaving this jurisdiction, or Australia, without the consent of the Court.
(2A) A reference in paragraph (1)(g) or (h) to property of a person includes a reference to property that the person holds otherwise than as sole beneficial owner, for example:
(a) as trustee for, as nominee for, or otherwise on behalf of or on account of, another person; or
(b) in a fiduciary capacity.
(2B) Subsection (2A) is to avoid doubt, is not to limit the generality of anything in subsection (1) and is not to affect by implication the interpretation of any other provision of this Act.
(2) An order under subsection (1) prohibiting conduct may prohibit the conduct either absolutely or subject to conditions.
(3) Where an application is made to the Court for an order under subsection (1), the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application.
(4) On an application under subsection (1), the Court must not require the applicant or any other person, as a condition of granting an interim order under subsection (3), to give an undertaking as to damages.
(5) Where the Court has made an order under this section on a person’s application, the Court may, on application by that person or by any person affected by the order, make a further order discharging or varying the first-mentioned order.
(6) An order made under subsection (1) or (2) may be expressed to operate for a specified period or until the order is discharged by a further order under this section.
(7) Nothing in this section affects the powers that the Court has apart from this section.
(8) This section has effect subject to the Bankruptcy Act 1966.
(9) A person must not contravene an order by the Court under this section that is applicable to the person.
(10) An offence based on subsection (9) is an offence of strict liability.
Note: For strict liability , see section 6.1 of the Criminal Code. ”

4 The orders sought by ASIC which do not fall within the express terms of s 1323(1)(d)-(k) are orders that the defendant be restrained from dealing or disposing with moneys held for clients, or with property acquired from moneys received by him from clients; that he be restrained from dealing with or disposing of any of his assets other than to pay ordinary living expenses up to $3,000 per week or costs reasonably incurred; and that he be restrained from coming within 100 metres of an Australian point of overseas departure.

5 Jurisdiction to make orders under s 1323 is conferred on the Court by s 1337B(2) of the Act. Subsection 1323(1) contains an express grant of power to make the orders in paragraphs (d)-(k) where the preconditions in paragraphs (a)-(b), or (c) are satisfied and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of an aggrieved person to whom the relevant person is liable, or may be or become liable, to pay money, or to account for financial products or other property. The application may be made by ASIC or by an aggrieved person. None of the express grants of power in paragraphs (d)-(k), extends to restraining a relevant person from dealing with or disposing of his or her money or property within the jurisdiction. Paragraphs (d) and (e) empower a Court to make orders prohibiting a person who owes money to a relevant person or who holds money or property for a relevant person from paying the debt or transferring the money or property to that person, or to an associate of that person, or from paying the money or transferring the property at that person’s direction. Paragraphs (f) and (g) confer power to make orders prohibiting the transfer of money or property out of Australia. Paragraph (h) confers power to appoint a receiver or trustee, or in the case of a body corporate, a receiver or receiver and manager, of the property of the relevant person.

6 The purpose of the conferral of these powers is to protect the interests of aggrieved persons by preserving the relevant person’s assets pending the outcome of the investigation, prosecution, or proceeding, so that the relevant person’s assets will be available to meet the claims of the aggrieved persons (Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547 at 553; Corporate Affairs Commission (NSW) v Lombard Nash International Pty Ltd & Ors (No. 3) (1987) 12 ACLR 113 at 116; Corporate Affairs Commission v Walker (1987) 11 ACLR 884 at 888 and 896; Corporate Affairs Commission v Lone Star Exploration NL (1988) 50 SASR 24 at 28-29; Corporate Affairs Commission of NSW v Transphere Pty Ltd (1988) 15 NSWLR 596 at 611; Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504 at 525).

7 Counsel for ASIC stressed that the grant of power to a Court should be given the most liberal and ample construction as its terms and context permit (Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 205; PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 at 313; Australian Gas Light Company v Mine Subsidence Board (2006) 147 LGERA 433 at 448 [46]-[48]). Counsel for ASIC submitted that as the purpose of the express powers granted in paragraphs (d)-(k) was to protect aggrieved persons from being left without recompense, the express powers should be construed as setting the outer limits of the power, and there was an implied ancillary or incidental power to make orders to restrain the dissipation of assets within the jurisdiction. Counsel submitted that the purpose of the orders for which express power was given could be undermined if such orders were not accompanied by orders restricting the relevant person’s ability to dissipate assets within the jurisdiction. Hence, it was submitted, it was proper or appropriate to imply the grant of a power to make orders restraining the relevant person from dealing with his or her assets within the jurisdiction. It was submitted that the test for determining whether such an implication arises is not whether the implication is necessary, but whether the implication appropriately or properly arises from the language used (FAR Bennion, Statutory Interpretation, 4th ed (2002) London, Butterworths at 427-428).

8 Counsel submitted that it would be very odd if the Court could make orders preventing the transfer of assets offshore and preventing debtors of the relevant person from putting him or her in funds so as to prevent the dissipation of assets, but did not have the power to restrain a relevant person from dissipating his or her assets within the jurisdiction. It was submitted that such a power should be implied.

9 Counsel also submitted that an order restraining a relevant person from dealing with his or her assets was an order having a lesser impact than an order appointing a receiver to such a person’s property. It was submitted that the grant of a greater power to interfere with a relevant person’s property by appointing a receiver to it imported a grant of the lesser power to make the usual asset preservation orders.

10 In support of the submission that the conferral of the power to appoint a receiver implied a power to make a lesser order, counsel referred to Beach Petroleum NL v Johnson (1992) 9 ACSR 404 at 406 where von Doussa J said:

“ The Mareva remedy is discretionary. So, too, is the remedy under s 1323 of the Corporations Law. Under the statute the discretion is to be exercised having regard to the need or the desirability of protecting the interests of people to whom the company may be or become liable to pay moneys. The discretion is a general one. In the exercise of the discretion the court may have regard to all the circumstances of the case: see Corporate Affairs Commission (SA) v Lone Star Exploration NL (1988) 50 SASR 24 ; 14 ACLR 499.
The appointment of a receiver or receiver and manager, whether in aid of a Mareva injunction or under s 1323(1)(h), is a drastic step not lightly to be taken. The party seeking such a remedy must make out a clear case not only that the protection of the interests of people to whom the company may be or become liable require protection, but also that a lesser remedy which does not involve removing the administration of the company from the directors would fit the circumstances of the case. “

11 In Beach Petroleum NL v Johnson, the application for Mareva injunctions and orders under s 1323(1)(h) of the Corporations Law were brought by plaintiffs asserting causes of action against the defendant in circumstances which justified the grant of an asset preservation order under established principles.

12 ASIC submitted that the courts have for many years granted asset preservation relief in s 1323 proceedings, citing as examples Australian Securities and Investments Commission v Burke [2000] NSWSC 694; Australian Securities and Investments Commission v Adler (2001) 38 ACSR 266; Australian Securities and Investments Commission v Rajnoch [2003] QSC 46; Australian Securities and Investments Commission v Michalik (2004) 211 ALR 285; and Australian Securities and Investments Commission v Burnard [2006] NSWSC 611).

13 In Australian Securities and Investments Commission v Burke, civil proceedings had been instituted by ASIC against the defendants for contravention of sections of the Corporations Law prohibiting unlicensed persons from dealing in securities or conducting an investment advice business or operating an unlicensed managed investment scheme. Mareva orders restraining the defendants from dealing with or removing their assets had already been made. Austin J concluded that the Mareva orders were not enough to ensure that the defendants’ assets were preserved and protected, or even identified and brought in for the benefit of investors, and concluded that an order appointing a receiver was justified. His Honour also made orders preventing one of the defendants from leaving Australia. These orders were made under s 1323. There is no discussion as to the basis upon which the earlier asset preservation orders had been made.

14 In Australian Securities and Investments Commission v Adler, ASIC’s application for asset preservation orders was made under ss 1323 and 1324 of the Corporations Law. Santow J (as his Honour then was) declined to grant ex parte relief. The application was resolved by consent by the proffering of undertakings without admission. Santow J discussed the proper approach to the exercise of discretion to make what his Honour summarised accurately as “asset preservation orders” under s 1323 of the Corporations Law. His Honour did not discuss the question whether the “asset preservation orders” which could be granted under s 1323 went beyond the orders expressly provided for in paragraphs (d)-(k). His Honour did observe that there may be a basis for persuading the Court that asset preservation orders “proportionate to the circumstances should be made” (at 269), but it is not clear from that that his Honour was considering whether orders could be made under s 1323 to restrain a person within the jurisdiction from dealing with his assets. Nor does the report disclose the terms of the undertakings which were accepted.

15 In Australian Securities and Investments Commission v Rajnoch, ASIC had instituted proceedings for declarations that a director had contravened ss 180, 181 and 182 of the Corporations Act and sought both pecuniary penalties and compensation orders. There was evidence of dissipation of the company’s moneys. The respondent was restrained until trial or further order from dealing with any or all of her assets or money. It appears that the order was made under s 1323 of the Corporations Act and not in the Court’s inherent jurisdiction, although the application was described as one for “Mareva orders”. However, there was no discussion as to whether such an order could be made under s 1323.

16 In Australian Securities and Investments Commission v Michalik, orders were made against the defendants under s 1323 of the Act. Asset preservation orders were also made restraining the defendants from dealing with their assets within the jurisdiction. The latter orders were made by consent. In dealing with the question as to whether the defendants should be required to make an affidavit of discovery of their assets, Barrett J observed (at [4], 286):

“ The asset preservation orders were made until further order and affected all three defendants. There can be no doubt that asset preservation orders have a part to play in proceedings of the present kind (see for example the observations of Santow J in Australian Securities and Investments Commission v Adler (2001) 38 ACSR 266) but, since the orders in this case were made by consent, I do not wish to be taken to express any opinion on the question whether circumstances warranting the making of them existed on 16 August 2004. ”

17 In Australian Securities and Investments Commission v Burnard, ASIC was conducting an investigation into the solicitation of investments from members of the public in the Westpoint Group of companies which had collapsed in mid 2005 with a substantial deficiency of assets. The investigation was at a very preliminary stage. There was a possibility of contraventions of the Corporations Act and the general law by two of the defendants of sufficient strength to require that ASIC continue its investigations. The possibility of contraventions of the Act by those defendants was sufficient to enliven the power under s 1323 if the Court considered it necessary or desirable to make an order to protect the interest of aggrieved persons. Palmer J refused to make an order for the appointment of a receiver to the property of those defendants and refused to appoint a provisional liquidator to the corporate defendant, but continued asset preservation orders which restrained them from dealing with their assets. A claim for a Mareva injunction against the third defendant, who evidently was not a relevant person within the meaning of s 1323, was refused.

18 I think counsel for ASIC is correct in submitting that in both Australian Securities and Investments Commission v Burnard and Australian Securities and Investments Commission v Rajnoch, it was assumed that s 1323 empowered the Court to make an asset preservation order to restrain a relevant person from dealing with his or her assets within the jurisdiction once the conditions in paras (a), (b) or (c) were established and the Court was satisfied that it was necessary or desirable to make such an order to protect the interests of an aggrieved person to whom the relevant person was, or might become, liable to pay money. However, the question of the source of such a power was not argued. Australian Securities and Investments Commission v Burnard was an ex-tempore judgment in the duty judge list.

19 Counsel for the defendant emphasised that s 1323 unequivocally states that where a condition in para (a), (b) or (c) is satisfied and the Court thinks it necessary or desirable to do so in the interests of an aggrieved person, then, it may “make one or more of the following orders”. Counsel submitted that there then followed detailed provisions in which the legislature established clear parameters to grant specific remedies against a defendant which entail the exercise of a “drastic power”. Counsel submitted that there was the potential for the powers under s 1323 to operate oppressively. The exercise of jurisdiction under s 1323 involves a balancing exercise in the nature of risk assessment and risk management (Australian Securities and Investments Commission v Carey (2006) 57 ACSR 307 at [26]). Counsel submitted that:

“ The thin veil that separates a proportionate remedy and balancing exercise from metamorphosing into oppression is twofold (a) discretion afforded to the Court to judge the evidence and adjust the remedy and (b) a defined parameter within which to permit the drastic remedy to operate .”

20 If s 1323 of the Act does not impliedly confer power on the Court to restrain a relevant person from dissipating his or her assets within the jurisdiction, it does not follow that such a power is not found elsewhere. Counsel for ASIC submit that if such a power is not found in s 1323, the Court is nonetheless empowered to make such orders either in its inherent jurisdiction, or pursuant to s 23 of the Supreme Court Act 1970 (NSW), or pursuant to subs 66(4) of the Supreme Court Act. Any such power is preserved by s 1323(7). Nonetheless, it is important to identify the source of power to make such orders. If power to make the orders were impliedly conferred by subs 1323(1), then the Court could not require the applicant or any other person to give an undertaking as to damages as a condition of granting an interim order under subs (3) (s 1323(4)). There would be no such restriction if the source of the power to make such an asset preservation order were found outside s 1323. Secondly, a person who contravenes an order made under s 1323 does not only commit a contempt. He or she commits an offence of strict liability under subs 1323(9) (s 1323(9) and (10)).

21 In Australian Securities and Investments Commission v Wiggins (1998) 90 FCR 314, Finkelstein J held that s 1323 did not empower the Court to restrain the disposition by a relevant person of property that was in the possession of that person (at 319-320). His Honour refused an order sought by ASIC restraining the respondent from transferring patent or patent applications. His Honour said (at 320) that:

“ I do not doubt that, on proper material, I have power to make an order along the lines sought by ASIC but it would not be an order in pursuance of the powers conferred by s 1323. However, the ASIC has indicated that it does not seek to base the order on some other power because it would not thereby obtain the advantage conferred by s 1323(4), namely, the advantage of not being required to give an undertaking as to damages. ”

22 In Australian Securities and Investments Commission v Carey (No. 14) (2007) 158 FCR 92; 25 ACLC 184, ASIC sought “freezing or Mareva type orders”, or alternatively, an order for the appointment of receivers to the property of a defendant who was the subject of an ongoing investigation by ASIC. The defendant was a “relevant person” within the meaning of s 1323 being a person who was, or might become liable, to pay money to an “aggrieved person”, being Westpoint Corporation. The application was said to be made both under s 1323 of the Corporations Act, and pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth), and what was said to be the implied jurisdiction of the Federal Court (at 94 [4]). Section 23 of the Federal Court of Australia Act provides that the Federal Court “has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.” French J said that s 23 of the Federal Court of Australia Act did not confer jurisdiction to make the orders sought. Section 23 did not confer jurisdiction, but conferred power on that Court to make orders in the exercise of the Court’s jurisdiction. The source of the jurisdiction had to be found elsewhere (at 94 [6] and 101 [34]) (see also Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 619, 620-621, 622, 632). French J held (at 101 [33]):

“...I accept that where, in an application under s 1323, the grounds for the appointment of receivers are made out, then a lesser order restricting or prohibiting dealings with the relevant property may be made instead. While s 1323 sets out the specific orders which may be made on an application brought under it, it does not, in my opinion, provide an exhaustive code of remedies to the extent that the power to appoint receivers excludes the lesser alternative of orders restricting or prohibiting dealings with the subject property. It may be, for example, that the appointment of receivers would be necessary or desirable to protect the interests of a potential claimant against the property of the company or individual to which the receivers are to be appointed. At the same time, such an appointment might inflict significant damage on an ongoing business which is detrimental to that business and perhaps also to third parties. In that event a lesser order freezing or limiting dealings with the subject property could be regarded as an exercise of the power under s 23.”

23 His Honour said (at 101-102 [36]) that if it were necessary or desirable, within the meaning of s 1323(1) that receivers be appointed to the property of the respondent, then the Court could consider the alternative of orders under s 23 of the Federal Court of Australia Act to prohibit or restrict dealings by the respondent in its assets for a limited time. However, an order for the appointment of receivers is a drastic remedy. As ASIC had not made out a case that it was necessary or desirable that receivers be appointed to the property of the respondent, it was not open to the Court to consider making a less drastic order to restrict the respondent in its dealings with its property.

24 Australian Securities and Investments Commission v Carey (No. 14) is not of assistance to ASIC in the present case. That case does not support ASIC’s submission that s 1323 impliedly confers power to make a “lesser order” prohibiting or restricting a relevant person from dealing with his or her property in the jurisdiction because it confers power on the Court to make the greater order of appointment of a receiver. To the contrary, it is authority that it is only where the Court has jurisdiction under s 1323 to make an order for the appointment of a receiver, which in turn would require the applicant to make out a case that it is necessary or desirable that receivers be appointed to the property of the relevant person, that the Court has power to make the more appropriate and lesser order. Moreover, French J held that that power is not a power implied in s 1323 but, for the Federal Court, arises under s 23 of the Federal Court of Australia Act.

25 This reasoning was followed by McDougall J in ASIC v Eric Krecichwost & Ors [2007] NSWSC 948 where his Honour said (at [34], [35] and [37]):

“ [34] Further, once the discretion is enlivened, it may be exercised calling in aid all relevant powers of the Court. Subsection (9) makes this plain (scil. subsection (7)). For this Court, those powers include powers given by or implied under SCA s23, and perhaps s66(4). But those powers are powers available in aid of the jurisdiction conferred by s1323 through the mechanism of s1337B(2). They are not powers available to the Court, as it were, at large.
[35] The significance of this is that any ‘alternative or lesser order’ is one made under s1323(1). Such orders therefore may be made once the requirements of that subsection have been met. There is no alternative or additional requirement, of the kind that would be relevant if the orders were made without reference to s1323. ...
...
[37] Thus, I conclude, if the Court is satisfied that it is necessary or desirable, for the protection of aggrieved persons, to appoint a receiver, it may in an appropriate case make instead a freezing order. If it decides to do so, it does not need to be satisfied of all the discretionary factors outlined in Cardile, Paterson, Frigo and the many other cases on this topic, in addition to the factors set out in s1323(1). In considering the question, the Court may, however, take into account the discretionary factors, including the matters listed by Santow J in Adler. This process may be of particular relevance where the appointment of a receiver is ‘desirable’ rather than ‘necessary’ .”

Implied Conferral of Powers by Subsection 1323(1)

26 An express conferral of power by a statute will usually carry with it by implication the conferral of power to do that which it may fairly be regarded as incidental to, or consequential upon, those things which are expressly authorised (Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125 at 130-131 per Lockhart J; Dunkel v Deputy Commissioner of Taxation (1990) 27 FCR 524 at 528; Johns v Connor (1992) 35 FCR 1; Attorney-General v Great Eastern Railway Co (1880) 5 AC 473 at 478; In re Northern Ireland Human Rights Commission [2002] HRLR 35; [2002] UKHL 25 per Lord Hutton at 1027-1029 [53]-[58]). In determining what may be fairly regarded as incidental to, or consequential upon, the grant of express powers in s 1323(1), the section is to be construed in a way which will promote its purpose or object of securing the interests of aggrieved persons that the property of relevant persons not be dissipated or removed until their claims are determined.

27 It is one thing to imply a conferral of power from the terms on which there is a grant of express power. It is quite another to imply a conferral of power to better effectuate the purpose for which the express powers are granted. There is no doubt that certain powers are impliedly conferred on the Court beyond those expressly provided. Thus, it is implied from the grant of power in s 1323(1)(h) to appoint receivers that orders may be made conferring powers on the receivers to assist them to identify and take possession of the relevant person’s assets, to determine how the costs of the receivership should be borne, and matters of that kind. It is under such an implied incidental power that the Court would ordinarily order the relevant person to provide an affidavit listing all his property and an order requiring him to transfer or deliver all of the property to the receiver (Corporate Affairs Commission v Smithson at 554). Such orders are incidental to the express grant of power to appoint a receiver.

28 Similarly, there can be implied, from the power to prohibit a relevant person from leaving Australia without the consent of the Court, a power prohibiting such a person from attempting to leave Australia without the leave of the Court. Otherwise, there would be no breach of the order until the person had reached a point where the order could not be enforced. This is also an illustration of the principle that the greater includes the less (Bennion, Statutory Interpretation at 475-476).

29 However, the implication of a power to restrain a person from dealing with property within the jurisdiction is not of this character. It is not an incident of any of the express grants of power. Rather, it is sought to imply the power in order more effectually to carry out the purpose of the section. There are limits to how far this can be done. In my view, ASIC’s submissions amount to a contention that Parliament, by inadvertence, failed to deal with a matter which must or should be dealt with to achieve the purpose of the section of securing the interests of aggrieved persons against the dissipation of a relevant person’s assets. Although counsel for ASIC disclaimed the proposition that this involved reading into s 1323 words which were not included, in my view, that is precisely what the submission entails. It requires the implication of a power to effectuate the purpose of the section, not to effectuate the exercise of any of the express powers. Before the section can be construed as if it contained the necessary words authorising an order to restrain a dealing with property in the possession of the relevant person, the three conditions formulated by Lord Diplock in Wentworth Securities Ltd v Jones [1980] AC 74 at 105-106 must be satisfied (Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292 at 299-300, 302; Tokyo Mart Pty Ltd v Campbell (1988) 15 NSWLR 275 at 283; Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 113; R v Young (1999) 46 NSWLR 681 at 686-687). Even then, the words in the statute must be reasonably open to the adopted construction (R v Young at 687 [12]). Those requirements are:

“ First, it was possible to determine from a consideration of the provisions of the Act read as a whole precisely what the mischief was that it was the purpose of the Act to remedy; secondly, it was apparent that the draftsman and Parliament had by inadvertence overlooked, and so omitted to deal with, an eventuality that required to be dealt with if the purpose of the Act was to be achieved; and thirdly, it was possible to state with certainty what were the additional words that would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission before the Bill passed into law. ” ( Wentworth Securities Ltd v Jones at 105-106).

30 The second and third of these conditions are not satisfied. There is nothing to show that it was by inadvertence that Parliament failed to confer power to make an order prohibiting or restricting a relevant person’s dealing with assets in his possession in the jurisdiction. Nor is it clear in what terms Parliament would have conferred such a power if it were thought that such a power were required. Even if counsel is correct in submitting that such a power can be implied without the need to read words into the section, these considerations militate against such an implication.

31 The predecessors of s 1323 of the Corporations Act are s 573 of the Companies Act 1981 (Cth) and s 147 of the Securities Industry Act 1980 (Cth). The explanatory memorandum to clause 573 of the Companies Bill (Explanatory Memorandum, Companies Bill 1981 (Cth)) stated that it was a new provision based on clause 273 of the Corporations and Securities Industry Bill 1975 (Cth). That clause had provided that where conditions, which were substantially the same as those now found in s 1323, were satisfied, the Court could make orders prohibiting the taking or sending out of Australia of money or property of the relevant person or an associate of such a person. Clause 147 of the Securities Industry Bill 1980 (Cth) provided for the powers now found in paras (d), (e), (f) and (g) of subs 1323(1). An explanatory paper, dated 28 March 1980, of the proposed new Australian Companies Code referred to the then clause 381A which would likewise have empowered a court to make orders of the kinds provided for in paras (d), (e), (f) and (g) of s 1323(1) where the investigation, prosecution or proceeding was in progress (Explanatory Paper, Proposed New Australian Companies Code, 28 March 1980 (Cth)). At that point, the proposed legislation did not include powers for the appointment of receivers to the property of a person subject to investigation, prosecution or proceeding. Nor, at that point, did the proposed legislation include powers to restrain such a person from leaving the country. The explanatory memorandum to the Securities Industry Bill 1980 stated (at 139 [259]) that:

“ The Supreme Court will be able to ensure that a person who is subject to investigation or to legal proceedings does not transfer all his property out of the jurisdiction (Bill cl 147-cf CSI Bill Cl 273 – no opposition was expressed to this provision in any submission to the Senate Select Committee on the CSI Bill). Situations can arise where a person removes all his property from the jurisdiction so that creditors and investors are left without recompense. The present provision, which is within the control of the Supreme Court, attempts to take account of their interests without preventing the person himself from leaving Australia. ”

32 Section 147 of the Securities Industry Act was in that form. It did not include a power to restrain a person under investigation, or subject to a prosecution or civil proceeding, from leaving the country. Nor did it confer power to appoint a receiver to the property of such a person. Such powers were conferred by an amendment to the Securities Industry Act (Securities Industry Amendment Act 1981 (Cth) s 19). That Act was assented to on 5 March 1981. The powers now found in s 1323(1) of the Corporations Act were provided for in s 573 of the Companies Act, assented to on 18 June 1981.

33 In other words, over a number of years of drafting, there was a considered and deliberate augmentation of the types of order which a court would be empowered to make against a person who was the subject of an investigation, prosecution or civil proceeding. This was happening at a time when the power of the Supreme Courts of the States and of the Federal Court to make orders restraining a defendant or prospective defendant from removing assets out of the jurisdiction, or dissipating assets, whether in or outside the jurisdiction, was a matter of contentious debate. It was in 1975 that the Court of Appeal in England first formulated the Mareva injunction (Nippon Yusen Kaisha v Karageorgis [1975] 1 WLR 1093; (1975) 3 All ER 282; Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyd’s Rep 509). It was in June 1980 that the English Court of Appeal concluded that:

“ ... a Mareva injunction can be granted against a man even though he is based in this country if the circumstances are such that there is a danger of his absconding, or a danger of the assets being removed out of the jurisdiction or disposed of within the jurisdiction, or otherwise dealt with so that there is a danger that the plaintiff, if he gets judgment, will not be able to get it satisfied. ” ( Rahman (Prince Abdul) v Abu-Taha [1980] 1 WLR 1268 at 1273; [1980] 3 All ER 409 at 412).

By 1981, there were conflicting decisions within the States as to whether or not the Supreme Courts had jurisdiction to grant Mareva relief (see Meagher, Gummow & Lehane, Equity: Doctrines and Remedies , 2nd ed (1985) Sydney, Butterworths at [2187]).

34 Although an order restraining a person from dealing with his assets in the jurisdiction otherwise than in the ordinary course of business or to pay reasonable living or other expenses is far less drastic than an order appointing a receiver to the person’s property, such an order maybe far more onerous to the person subject to it than any of the orders provided in paras (d)-(g) of subs 1323(1). It may be far more onerous than an order prohibiting the person from leaving the jurisdiction without the consent of the Court. Parliament and the draftsman did not proceed on the basis that the conferral of power to make the most onerous order (the appointment of a receiver) impliedly carried with it powers to make other orders relating to the disposition of the relevant person’s property. If it had assumed that such a power was implied from the conferral of a power to appoint a receiver, there would have been no need for the express conferral of power to make an order prohibiting the relevant person from taking or sending his money or property out of the jurisdiction. Such a power could as well be implied from a power to appoint a receiver to the person’s property as could a power to restrain the disposition of assets within the jurisdiction. In my view, subs 1323(1) does not confer a power by implication to make the asset preservation orders sought by ASIC.

Asset Preservation Orders in the Court’s Inherent Jurisdiction or Under the Supreme Court Act

35 As was held in Australian Securities and Investments Commission v Carey (No. 14) and in ASIC v Krecichwost, where the power to appoint a receiver under s 1323(1)(h) is engaged, powers in the inherent jurisdiction of the Court, or under s 23 of the Supreme Court Act, are available in aid of the jurisdiction conferred by s 1323. The Court can then consider whether other asset preservation orders should be made instead of an order appointing a receiver. According to McDougall J in ASIC v Krecichwost, an asset preservation order made on this basis is still an order under s 1323(1), and therefore, presumably, an undertaking as to damages cannot be required (s 1323(4)).

36 Neither French J nor McDougall J said that such orders could be made in aid of orders under s 1323(1)(d)-(g) that is, in aid of orders restraining third parties from transferring property to the relevant person or in aid of orders preventing the relevant person transferring assets overseas. Prima facie, an asset preservation order restraining a relevant person from dealing with his or her own assets in the jurisdiction would not operate less harshly on the relevant person than would orders under s 1323(1)(d)-(g).

37 In my view, independently of s 1323, the Court’s inherent jurisdiction and the jurisdiction conferred by s 23 of the Supreme Court Act, do not extend to the making of an asset preservation order in the circumstances of this case. No proceeding has been commenced or is foreshadowed by ASIC for an order which might provide monetary compensation to aggrieved persons. One aggrieved person has commenced proceedings but has not sought such relief himself. There is no question of the Court’s process being frustrated or abused. Whilst the purpose of making the order restraining the defendant from transferring assets outside Australia (namely, preserving his assets to meet potential claims of aggrieved persons) could be frustrated by his dissipating assets within the jurisdiction, neither the scope nor the effect of that order would be affected. If, as I consider to be the case, s 1323 does not impliedly confer the wider power, the power cannot be found in the Court’s inherent jurisdiction where there is no question of the frustration or abuse of the Court’s process.

38 It follows that, unless it were necessary or desirable to make an order for the appointment of a receiver to the defendant’s property for the protection of aggrieved persons, there is no power to make the asset preservation orders sought. McDougall J said in ASIC v Krecichwost (at [45]) that, in asking whether it is necessary or desirable for the protection of aggrieved persons to appoint a receiver, one looks at the needs of those persons and the threats or risks to those needs, rather than the drastic nature of the remedy. In considering whether to make an order for the appointment of a receiver, one considers the risk of dissipation of assets to frustrate the potential claims of aggrieved persons to monetary compensation. If that risk is such to warrant the appointment of a receiver to the relevant person’s property, the jurisdiction under s 1323(1)(h) is enlivened, but before making an order for the appointment of a receiver, the Court must consider whether a less drastic remedy will suffice.

39 ASIC did not seek an order for the appointment of a receiver. Whilst I considered that the orders I made on 16 May 2007 were necessary or desirable to protect the interests of persons to whom the defendant may be liable to pay monetary compensation, I would not be satisfied on the material then adduced that an order for the appointment of a receiver to the defendant’s property would be necessary or desirable.

Power to Prohibit a Relevant Person from Coming Within a Specified Distance of an Australian Point of Departure

40 I also do not consider that subs 1323(1) impliedly confers a power to restrain a relevant person from coming within a certain distance of an Australian point of departure. Whilst the power in s 1323(1)(k) does extend in my view to restraining a person from attempting to leave Australia, I see no basis on which a court under this section could limit a person’s right to travel within the jurisdiction. The orders sought, if made, would prohibit the defendant from driving past, or catching a ferry which passed, the overseas terminal at Circular Quay. The order would prevent the defendant from meeting a traveller from overseas, or farewelling a family member or friend, at the airport. In my view, there is no power to make such an order. It was submitted that the order would be convenient because it would allow for an arrest warrant to be sought if a person subject to an order restraining him from leaving the country attempted to do so. In my view, that is not a sufficient reason for making an order in the terms sought. Such a situation is sufficiently accommodated by an order restraining an attempt at departure.

41 ASIC’s investigation should now be further advanced or be complete. The question whether the existing injunctions and order should be discharged, or whether, in the light of its further investigations, ASIC wishes to seek an order for the appointment of a receiver, or asset preservation orders in lieu thereof, should be determined on the basis of what has now been ascertained as a result of ASIC’s investigations.

42 I will stand the matter over to a convenient time to allow the parties to consider these reasons. I will then hear the parties on costs.

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