Australian Securities and Investments Commission v Open4Sale Global Ltd
[2024] FCA 718
•21 June 2024
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Open4Sale Global Ltd [2024] FCA 718
File number: SAD 187 of 2023 Judgment of: CHARLESWORTH J Date of judgment: 21 June 2024 Date of publication of reasons: 8 July 2024 Catchwords: PRACTICE AND PROCEDURE – interlocutory injunction – absence of a defendant against whom orders with injunctions are sought – orders made in absence of defendant – defendant previously represented – defendant not filing a notice of address for service after former lawyer ceased to act – application for injunction determined on merits on uncontradicted material – utility in order restraining conduct that would otherwise constitute a contravention of the law Legislation: Corporations Act 2001 (Cth) ss 206C, 206E, 727, 1324
Federal Court Rules 2011 (Cth) r 39.05
Cases cited: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 Division: General Division Registry: South Australia National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 19 Date of hearing: 21 June 2024 Counsel for the Plaintiff: Ms S MacKenzie Solicitor for the Plaintiff: Australian Securities and Investments Commission Counsel for the First and Third Defendants: Mr B Connell Solicitor for the First and Third Defendants: Belperio Connell Lawyers Counsel for the Second Defendant: The Second Defendant did not appear ORDERS
SAD 187 of 2023 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: OPEN4SALE GLOBAL LTD (ACN 159 248 067)
First Defendant
SIMEON MICHAEL LA BARRIE
Second Defendant
EWALD HAFER
Third Defendant
ORDER MADE BY:
CHARLESWORTH J
DATE OF ORDER:
21 JUNE 2024
PENAL NOTICE
TO: OPEN4SALE GLOBAL LTD (ACN 159 248 067)
SIMEON MICHAEL LA BARRIE
EWALD HAFER
IF YOU (BEING THE PERSON BOUND BY [1]-[2] OF THIS ORDER):
A.REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR
B.DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING,
YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY
OR OTHER PUNISHMENT FOR CONTEMPT.
ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING
WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER
MAY BE SIMILARLY PUNISHED.THE COURT NOTES THAT:
A. A notice of address for service for the second defendant was filed on 17 May 2024.
B. A notice of intention to cease to act was filed by the former lawyer for the second defendant on 22 May 2024.
C. A notice of ceasing to act was filed by the former lawyer for the second defendant on 30 May 2024.
D. The time by which a notice of address for service was to be filed by or on behalf of the second defendant has now passed.
E. The hearing proceeded on the basis of a default of appearance by the second defendant.
THE COURT ORDERS THAT:
1.Pursuant to s 1324(4) of the Corporations Act 2001 (Cth) (Corporations Act), each of the first, second and third defendants (by itself/themselves, or its/their servants, agents, employees or otherwise) be restrained, until the hearing and final determination of this proceeding or further order (restraint period), from offering securities in the first defendant, or in any Australian company which purports directly or indirectly to be engaged in the commercialisation of information technology, or distributing application forms for such offers, that need disclosure under Pt 6D.2 of the Corporations Act, without:
(a)a disclosure document for the offer(s) being lodged with the Australian Securities and Investments Commission (ASIC) as required under s 727(1) of the Corporations Act; and
(b)the offer(s) and application form(s) being included in or accompanied by a compliant disclosure document as required under s 727(2) of the Corporations Act.
(restrained offer).
2.Pursuant to s 1324(4) of the Corporations Act, each of the first, second and third defendants, during the restraint period, be required within 48 hours of a written request of ASIC to provide ASIC with evidence sufficient to demonstrate that any monies accepted or solicited during the restraint period were not in respect of a restrained offer.
3.Until such time as the second defendant has filed an address for service, the plaintiff may provide any further documents in the proceeding on the second defendant by any of the means set out below:
(a)by emailing a copy to his email address ([email protected]); or
(b)alternatively, by posting a copy by international registered post to:
3002 Avenida Imperial
San Clemente
California, 92673
USA
; or
(c)alternatively, by such other email address provided to it by the second defendant’s former lawyer.
4.The defendants pay the plaintiff’s costs of and incidental to the plaintiff’s application filed on 10 May 2024.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
CHARLESWORTH J
The Australian Securities and Investments Commission (ASIC) applied for interlocutory injunctions under s 1324(4) of the Corporations Act 2001 (Cth) to restrain each of the three defendants from offering securities in the first defendant or any other Australian company engaged in the commercialisation of information technology, or distributing application forms for such offers, without the requisite disclosure documentation being lodged in accordance with the Act.
The first and third defendants are legally represented. They each consented to orders with injunctions in the terms sought by ASIC. Those orders were made on 21 June 2024. The second defendant did not appear at the hearing. The Court proceeded to determine the application against the second defendant in his absence. That part of the application was allowed for reasons given orally on that day. The parties in attendance were informed that written reasons would follow. These written reasons explain why orders against the second defendant were made in his absence.
The originating application
By its originating application ASIC seeks declarations, orders for pecuniary penalties, disqualification orders and injunctive relief in connection with alleged contraventions by the defendants of ss 727(1), 727 (2) and 727 (6) of the Act. The alleged contraventions relate to offers for the issue of shares in the first defendant between 13 March 2019 and 26 July 2023. ASIC alleges that the first defendant failed to lodge a disclosure document with ASIC and without the offers being included in, or the application forms accompanying, a disclosure document.
The second defendant, Mr Simeon Michael La Barrie, was a director of the first defendant at the time of the alleged contraventions. ASIC seeks orders under s 206C or s 206E of the Act that he be disqualified from managing corporations for such period as the Court considers appropriate, together with final injunctions restraining him from:
11.1.offering securities, or distributing application forms for such offers, that need disclosure under Part 6D.2 of the Act, or from causing, assisting or procuring any other person to do so, or being in any way, directly or indirectly, knowingly concerned in or party to such conduct, unless (a) a disclosure document for the offer(s) has been lodged with ASIC as required under s 727(1) of the Act; and (b) the offers and application forms are included in or accompanied by a compliant disclosure document as required under s 727(2) of the Act;
11.2.soliciting or accepting any monies from an existing shareholder in Open4Sale Global or any associate of such shareholder pursuant to any arrangement, where the existing shareholder:
11.2.1.was issued securities in connection with an offer of securities which needed disclosure under Part 6D.2 of the Act; and
11.2.2.was not provided with, and has not since been provided with, a compliant disclosure document as required under s 727(2) of the Act.
A notice to the defendants on the face of the originating application specifies an address for Mr La Barrie as that of Belperio Connell Lawyers in Adelaide, “Attention: Mr Brendan Connell”. On the basis of correspondence passing between the parties I am satisfied that at the time that this proceeding was commenced the second defendant was represented by Mr Connell, that Mr Connell had instructions to accept service of the initiating documents on his behalf and that he in fact did so.
Sometime later, Mr Connell advised ASIC that he would no longer be acting for the defendants. That occurred in circumstances where no address for service had been filed by Mr Connell on behalf of any of the defendants in accordance with the Federal Court Rules 2011 (Cth). Mr Connell has since explained to the Court that the failure to file a notice of address for service was an oversight and the Court has accepted that explanation. The Court required that Mr Connell filed a notice of acting on behalf of the defendants before filing any notice of ceasing to act in respect of any one of them. Mr Connell then filed a notice of acting on 17 May 2024 confirming his representation of the defendants, then a notice of intention to cease to act for Mr La Barrie on 22 May 2024 and a notice of ceasing to act in respect of him on 30 May 2024. In accordance with the Rules, Mr Connell specified a last known address for Mr La Barrie in the notice of ceasing to act.
Mr La Barrie has not filed a notice of address for service within the timeframe specified in the Rules, nor has a notice of acting been filed on his behalf by any new legal representative.
ASIC filed the present application for interlocutory injunctions on 10 May 2024. It is supported by the affidavit of Mr Andrew Anthony Kenneth Smith affirmed on 10 May 2024 (Smith Affidavit). The whole of the Smith Affidavit has been read. The Court has also had regard to correspondence concerning the legal representation of Mr La Barrie, marked for identification MFI-A1.
I am satisfied that the interlocutory application was served on the second defendant by way of service on Mr Connell who was at that time the solicitor on the record for him.
In the circumstances described, I am satisfied that Mr La Barrie has been served in Australia with initiating documents and the interlocutory application and supporting affidavit, irrespective of whether or not he ordinarily resides in any other country.
The hearing proceeded in the absence of any admissible evidence explaining why Mr La Barrie was not in attendance. It is open to Mr La Barrie to make an application for the orders to be set aside under provisions such as r 39.05 of the Rules both on the ground that they are interlocutory in nature and on the ground that they were made in his absence.
At general law, the principles guiding the Court’s discretion to grant an interlocutory injunction are well established. The applicant for the injunction must show that there is a serious question to be tried at a level sufficient to justify the orders sought, and that the balance of convenience favours the making of the order: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57. The same principles may be applied on an application under s 1324 of the Act.
In its discretion, the Court has not required ASIC to give an undertaking as to damages in light of its status as a regulator responsible for the administration and enforcement of the Act.
The absence of Mr La Barrie has the forensic consequence that there is no evidence to counter that adduced by ASIC in support of the application. On the basis of that material I am satisfied that there is a serious question to be tried as to whether or not Mr La Barrie is liable for the contraventions alleged against him.
As to the balance of convenience, I am mindful that the injunctions sought against Mr La Barrie would restrain him from acts that are prohibited in any event under the Act. As such, it is difficult to envisage what practical inconvenience might be suffered by him if the interlocutory application was granted. The order has some utility in that, in the event of a breach, penal consequences may be imposed on him in the exercise of the Court’s power to punish a person for a contempt of its orders. I take into account that the orders have the effect of exposing him to that form of sanction in the event of a breach.
In support of the application, ASIC alleges that the defendants have breached undertakings given to it in December 2022 in connection with the subject matter of the proceeding. It is not necessary to make any conclusive findings as to whether any such undertakings were breached. It is enough to observe that the uncontradicted evidence is capable of supporting such a finding.
I have otherwise read and accepted arguments advanced in ASIC’s written submissions dated 12 June 2024. Given the absence of opposition from Mr La Barrie it is unnecessary to summarise those submissions here.
ASIC sought further orders specifying email and physical addresses at which documents in this proceeding should be served on Mr La Barrie. Having satisfied myself that Mr La Barrie was served with the initiating documents in the proceeding, and that he was notified of the intention of Mr Connell to cease acting for him, I do not consider it necessary for either the Court or ASIC to take additional steps in order to provide him with documents filed in the proceeding. The Rules prescribe the means by which Mr La Barrie may participate in this proceeding, commenced by initiating documents duly served upon him. If he wishes to participate in the proceeding and to be heard in connection with the relief sought against him, then he should comply with the obligation to file a notice of address for service in accordance with the Rules. Whether or not he does so is his choice. The Court need do no more than afford him an opportunity to be heard, and that has been done.
Mr La Barrie’s failure to attend at future hearings in the proceeding may result in final relief being granted in his absence, either by reference to the substantive merits of the case, or in the exercise of the Court’s power to make orders in default of the appearance of a party. It is for that reason that I do not consider it necessary to be prescriptive about the manner in which ASIC provides further documents to Mr La Barrie. Accordingly, orders relating to service will be expressed in a way that is facilitative but not mandatory. Mr La Barrie may be punished for breach of an order of the Court, provided that ASIC can demonstrate that the order has come to his attention. It is neither necessary nor appropriate to confine the means by which that may be done.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth. Associate:
Dated: 21 June 2023
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