Australian Securities and Investments Commission v Market Street

[2005] FCA 1807

FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Market Street
Mezzanine Limited ACN 091 354 513,
In the Matter of Market Street Mezzanine Limited ACN 091 354 514
[2005] FCA 1807

SUBPOENA – request for leave to issue – notice to intended recipient – documents sought irrelevant to pending proceedings – leave refused

Corporations Act 2001 (Cth)

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MARKET STREET MEZZANINE LIMITED ACN 091 354 513
WAD 340 OF 2005

FRENCH J
8 DECEMBER 2005
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 3430 OF 2005

IN THE MATTER OF MARKET STREET MEZZANINE LIMITED
ACN 091 354 513

IN THE MATTER OF SECTION 1274
OF THE CORPORATIONS ACT 2001 (Cth)

BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION PLAINTIFF
AND:	MARKET STREET MEZZANINE LIMITED ACN 091 354 513 DEFENDANT
JUDGE:	FRENCH J
DATE OF ORDER:	8 DECEMBER 2005
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.The application for leave to issue a subpoena in the form lodged on 5 December 2005 is refused.

2.The defendant is to pay the plaintiff’s costs of the application for leave.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 3430 OF 2005

IN THE MATTER OF MARKET STREET MEZZANINE LIMITED
ACN 091 354 513

IN THE MATTER OF SECTION 1274
OF THE CORPORATIONS ACT 2001 (Cth)

BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION PLAINTIFF
AND:	MARKET STREET MEZZANINE LIMITED ACN 091 354 513 DEFENDANT

JUDGE:	FRENCH J
DATE:	8 DECEMBER 2005
PLACE:	PERTH

REASONS FOR JUDGMENT

1. The Australian Securities and Investments Commission (ASIC) seeks orders under the Corporations Act 2001 (Cth) (the Act) requiring compliance by Market Street Mezzanine Ltd (Market Street) with subs 319(1) of the Act, being orders that Market Street should lodge the financial reports, the directors’ report and the auditor’s report for the financial year ended 30 June 2005, required to be filed under the Act. ASIC seeks an order that these things be done within seven days of an order of the Court to that effect.

2. The application, which has been filed by ASIC, is returnable on 14 December 2005 and it appears that it will be possible to actually deal with its substance at that time along with a number of other like applications with regard to other companies in the Westpoint Property Group. 

3. On 5 December 2005 Market Mezzanine made a request for leave to issue a subpoena to ASIC.  The documents which it sought in the subpoena are described thus:

   ‘1. All documents created or received in the period 1 January 2003 to 30 November 2005 passing between the Applicant (ASIC) and the Respondent’s auditors, KPMG, in connection with the preparation by KPMG of their various audit reports in relation to:

   (a)the Respondent’s financial statements for the years ending 30 June 2003, 30 June 2004 and 30 June 2005; and

   (b) the financial statements for the years ending 30 June 2003, 30 June 2004 and 30 June 2005 for other entities within the Westpoint Group,…’

   [including a number of companies whose names are then set out.] 

   The second and third classes of documents sought are:

   ‘2.All documents, including, but not limited to, all notes, and any recording, of any oral or other communications between any ASIC officer, including but not limited to ASIC’s Deputy Chair and head of its Insolvency Enforcement Unit, and KPMG in relation to KPMG’s Audit Reports created or received in the period 1 January 2003 to 30 November 2005.

   3.All other documents which touch or concern KPMG’s Audit Reports created or received in the period 1 January 2003 to 30 November 2005.’

4. The request for leave to issue that subpoena, having been referred to me by a Registrar of the Court, I directed that notice of the request be given to ASIC so that it would have the opportunity to be heard on whether leave should be given.  This is, on occasions, a convenient way to proceed which saves the necessity of entertaining, at a later stage, an application to set aside the subpoena.  Having regard to the time frame within which these proceedings are to be heard it enables questions about the appropriateness of the subpoena to be dealt with expeditiously.

5. ASIC has appeared and has opposed the grant of leave.  Mr Evans, on behalf of Market Street, submits that the documents are sought in order that the impact of regulatory requirements, inquiries, and the like conducted by ASIC with the group’s auditors and, in particular, the auditors of Market Street, has contributed to or caused the delay in the filing of the required reports.  It is submitted that this goes to the discretion that I would have in terms of any extension of time or time allowed for filing of the reports.  ASIC opposed leave on the basis that the Act imposes a strict liability to file within a certain time and that the only question relevant to my discretion is how long the audit is likely to take to complete, rather than underlying reasons related to the conduct of the regulator.  

6. I propose to refuse leave to issue this subpoena.  Even allowing for the purpose addressed by Mr Evans on behalf of the defendant, Market Street, the categories of documents sought are, on any view, far wider than necessary to serve any legitimate purpose, so going to the Court’s discretion.  Assuming it is accepted that the reports are late (and that much appears not to be disputed) the relevant question will be how much time should be allowed to file the reports.  To that extent, the time that KPMG is likely to take to complete the audit process, will be of relevance.  The reference in Court to a raft of documents involving communications between KPMG and ASIC is not going to assist the Court in that task.  Leave is refused.

I certify that the preceding six numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Associate:

Dated:             8 December 2005

Counsel for the Plaintiff:	Ms P Cahill
Solicitor for the Plaintiff:	Australian Investment and Securities Commission
Counsel for the Defendant:	Mr PD Evans
Solicitor for the Defendant:	Freehills
Date of Hearing:	8 December 2005
Date of Judgment:	8 December 2005