Australian Securities and Investments Commission v Matthews

[1999] NSWSC 763

Reported Decision: [1999] 32 ACSR 519
[1999] 17 ACLC 1648

New South Wales

Supreme Court

CITATION:	ASIC v Matthews [1999] NSWSC 763
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	3183/99
HEARING DATE(S):	26 July 1999
JUDGMENT DATE:	26 July 1999
PARTIES :	Australian Securities & Investments Commission (P) v Stephen Lewis Matthews (D)
JUDGMENT OF:	Austin J

COUNSEL :	D R Stack (P) Defendant in person
SOLICITORS:	J Redfern (P) Defendant in person
CATCHWORDS:	Courts - jurisdiction - jurisdiction of Federal Court of Australia in State matter - orders under Federal Courts (State Jurisdiction) Act 1999 (NSW) - criteria for orders
ACTS CITED:	Federal Courts (State Jurisdiction) Act 1999 (NSW), ss 3, 4, 6, 11 Corporations (New South Wales) Act 1990 (NSW) s 42 Corporations Law, ss 781, 995, 1018, 1019
CASES CITED:	Re Wakim; ex parte McNally (1999) 31 ACSR 99
DECISION:	Orders and declarations made as sought

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

MONDAY 26 JULY 1999

3183/99 - AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION v STEPHEN LEWIS MATTHEWS

JUDGMENT (Delivered ex tempore on 26 July 1999; revised 27 July 1999)

1 HIS HONOUR: This matter comes before the Court by summons for orders under the Federal Courts (State Jurisdiction) Act 1999 (NSW) (‘Jurisdiction Act’). The orders sought are of two kinds: first, an order pursuant to s 11 of the Jurisdiction Act that a certain Federal Court proceeding be treated as a Supreme Court proceeding; and, secondly, declarations to the effect that under s 6 of the Jurisdiction Act the rights and liabilities of persons affected by certain judgments and orders of O’Connor and Sackville JJ in that proceeding are the same as if they had been valid judgments and orders of the Supreme Court. 2 The proceeding in the Federal Court was brought by an application in the New south Wales District Registry of that court pursuant to s 1324 of the Corporations Law, filed on 16 February 1999. Essentially the complaint is that the defendant, without any licence or authority, is carrying on an investment advice business contrary to s 781 of the Corporations Law by means of an internet site called ‘The Chimes’, and is thereby engaging in misleading conduct contrary to s 995, and has thereby invited subscriptions for securities in a company not yet formed contrary to s 1019 and without a prospectus contrary to s 1018. 3 Sections 781, 995, 1019 and 1018 of the Corporations Law of New South Wales do not expressly articulate any territorial nexus with this State. In my opinion, it is appropriate to infer from the defendant’s Sydney residential address and his personal appearance before me that the activity of which the plaintiff complains is sufficiently connected with this State that the Federal Court proceeding is correctly described as a civil matter arising under the Corporations Law of New South Wales. That being so, s 42(1) of the Corporations (New South Wales) Act 1990 (NSW) (‘Application Act’) confers jurisdiction on this Court, and s 42(3) of the Application Act purports to confer jurisdiction on the Federal Court, with respect to the matter. 4 On 19 February 1999 O’Connor J made interim orders including injunctions restricting the defendant from giving advice and publishing reports about securities. One of O’Connor J’s orders (order 4) was that ‘until further order the respondent Stephen Lewis Matthews be restrained from publishing reports or allowing to be published reports about securities on the internet including, but not limited to, the internet site as ‘The Chimes’ and situated at htpp// 5 On 22 March 1999 the plaintiff filed a notice of motion in the Federal Court seeking orders that the defendant be found guilty of and punished for contempt of the orders of O’Connor J made on 19 February 1999. The application for contempt orders was dealt with by Sackville J on 16 June 1999. His Honour found that the defendant was guilty of contempt and made certain orders including an order for the defendant’s imprisonment. 6 On the day after Sackville J made those orders, the High Court of Australia delivered its judgment in Re Wakim; ex parte McNally (1999) 31 ACSR 99. The effect of the High Court’s judgment is that under the Constitution the Federal Court of Australia cannot exercise jurisdiction in a matter brought solely under the Corporations Law of a State, although the High Court accepted that the Federal Court possesses accrued jurisdiction in connection with federal matters. 7 On 15 July 1999 the matter returned to Sackville J and at the hearing before his Honour, counsel for the plaintiff conceded on instructions that, in view of the High Court’s judgment in Wakim, the Federal Court had no jurisdiction to hear the proceeding. During the course of the hearing Sackville J said to counsel for the plaintiff:

‘Your position is that this Court has no jurisdiction to hear these proceedings. What I will do is stand this matter over generally and note that the Court has no jurisdiction in relation to the completion of this matter. I do not think it makes any difference if I stand the matter over to a particular date.’

Section 11(2) of the Jurisdiction Act is in the following terms:

‘A person who was a party to a proceeding in which a relevant order is made may apply to the Supreme Court for an order that the proceeding be treated as a proceeding in the Supreme Court, and the Supreme Court may make such an order.’

8 The expression ‘relevant order’ is defined in s 11(1). The evidence before me is that Sackville J made an order standing the proceeding over generally, expressly on the basis that the Federal Court had no jurisdiction to deal with it. In my opinion this falls within paragraph (a) of the definition of ‘relevant order’, because in substance Sackville J’s order is an order of a federal court staying a proceeding relating to a State matter for want of jurisdiction, even though it is not formally expressed to be an order staying the Federal Court proceeding. 9 If I am wrong in that respect, then at least Sackville J’s determination on 15 July 1999 is properly characterised as another decision or determination by a federal court that it has no jurisdiction to hear and determine a proceeding relating to a State matter, and therefore falls within paragraph (c) of the definition of ‘relevant order’ in s 11(1). 10 The proceeding relates to a ‘State matter’ because it is a matter in respect of which either this Court has jurisdiction otherwise than by reason of the law of the Commonwealth or another state or Territory (the jurisdiction of this Court being found in s 42(1) of the Application Act), or the Application Act (s 42(3)) purports to confer jurisdiction on the Federal Court of Australia: see definitions of ‘State matter’, paragraphs (a) and (c), and ‘relevant State Act’, paragraph (d), in s 3 of the Jurisdiction Act. 11 I therefore conclude that this Court has jurisdiction under s 11(2) of the Jurisdiction Act to make an order that the Federal Court proceeding be treated as a proceeding of this Court. Given the effect that the decision in Wakim otherwise would have on the proceeding, it seems to me unquestionably appropriate that the order be made. 12 Section 6 of the Jurisdiction Act states (relevantly) that the rights and liabilities of all persons are, by force of that Act, declared to be, and always to have been, the same as if each ineffective judgment of the Federal Court of Australia had been a valid judgment of the Supreme Court. By s 4 an ‘ineffective judgment’ is (relevantly) a judgment of a federal court in a State matter given or recorded before the commencement of s 4, in purported exercise of jurisdiction purporting to have been conferred on the federal court by a relevant State Act. The Jurisdiction Act, including s 4, commenced on 9 July 1999. I have already held that the Federal Court proceeding in this case relates to a State matter, and that the Federal Court has purported to exercise jurisdiction purporting to have been conferred by a relevant State Act, being the Application Act. The word ‘judgment’ is defined in s 3 of the Jurisdiction Act to include an order, whether final or interlocutory. 13 It follows, in my view, that the orders made by O’Connor on Sackville JJ on 19 February and 16 June 1999 fall within s 6. Consequently, they are to be treated under that section as if they were valid orders of the Supreme Court of New South Wales. To avoid doubt, it is appropriate that I make declaratory orders to that effect. 14 At the hearing of the plaintiff’s summons today, the defendant appeared personally without legal representation. He submitted that it would be unsafe for the Court to ‘rubber stamp proceedings of another court’. He contended that the Federal Court proceedings were so hurried that he had had no time to obtain legal advice. Further, he drew attention to O’Connor J’s order 4, which I have set out above, and said it was an order with which he could not comply. He concluded that there would be jeopardy and lack of safety in my confirming such orders. He said he wished to adduce evidence about the credibility of the plaintiff. He said that he wanted time to obtain legal advice and representation to develop his submissions on these points. He sought an adjournment for two months. 15 In my view very little of the defendant’s submissions goes to the issues for determination in the summons, which are issues about the proper construction and application of the Jurisdiction Act. As I explained to the defendant several times, some of his submissions are matters which he will have the opportunity to develop in preparation for the final hearing of the matter; other submissions might lead him to consider an application to vary or even discharge the orders made by O’Connor and Sackville JJ, but they do not go to the present application. The only submission which has some relevance to today’s application is his submission that he be given time to obtain legal advice. I formed the view that the legal advice which he wishes to obtain, if indeed he obtains advice, would be legal advice on matters going to the merits of the dispute rather than the technical construction of the Jurisdiction Act. It seems to me, in those circumstances, that to adjourn the present application to enable Mr Matthews to obtain legal advice would serve no point. 16 I have discussed the formal orders which I propose to make and the plaintiff has offered to prepare short minutes.

NOTE: subsequently orders were made as follows:

‘The Court:

1. Orders that the proceeding of Australian Securities and Investments Commission v Stephen Lewis Matthews N3017 of 1999 in the Federal Court of Australia (‘the Proceeding’) be treated as a proceeding in the Supreme Court of New South Wales.

2. Directs that the Registrar of the Supreme Court arrange with the Registrar of the Federal Court of Australia for the transfer of the file of the Proceeding.

3. Declares that the rights and liabilities of the parties to the Proceeding are, and always have been, the same as if the judgment of O’Connor J on 19 February 1999 in the Proceeding had been valid judgment of the Supreme Court in the Equity Division, constituted by a Judge of the Supreme Court.

4. Declares that the rights and liabilities of the parties to the Proceeding are, and always have been, the same as if the judgment of Sackville J on 16 June 1999 in the Proceeding had been valid judgment of the Supreme Court in the Equity Division, constituted by a Judge of the Supreme Court.

5. Directs that the matter be stood over for pre-trial directions on 30 August 1999.’
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Last Modified: 08/04/1999