Australian Securities and Investments Commission v Singapore Liason Pty Ltd
[1999] FCA 350
•31 MARCH 1999
FEDERAL COURT OF AUSTRALIA
Australian Securities & Investments Commission v Singapore Liason Pty Ltd [1999] FCA 350
CORPORATIONS LAW - application for interlocutory injunctions by Australian Securities and Investments Commission for alleged contravention of Corporations Law and Australian Securities and Investments Commission Act 1989 (Cth) - whether serious question to be tried that third respondent had contravened the Corporations Law and the Australian Securities and Investments Commission Act 1989 (Cth) or that the third respondent had been knowingly concerned in or had aided, abetted, counselled or procured a contravention by the first respondent - whether discretion ought to be exercised to make orders requiring disclosure of and freezing of assets - whether reasonable grounds for belief that respondent would dispose, transfer or dissipate assets - whether prima facie cause of action - whether danger that, by reason of third respondent’s absconding or of assets being moved out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the applicant if successful will not be able to have judgment satisfied.
PRACTICE AND PROCEDURE - application for interlocutory injunctions requiring disclosure of and freezing of assets - Mareva type relief - whether discretion ought to be exercised to make orders requiring disclosure of and freezing of assets - whether reasonable grounds for belief that respondent would dispose, transfer or dissipate assets - whether prima facie cause of action - whether danger that, by reason of third respondent’s absconding or of assets being moved out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the applicant if successful will not be able to have judgment satisfied.
Corporations Law s 1323, s 1324, s 1114
Australian Securities and Investments Commission Act 1989 (Cth) s 12GE, s 12GN
Federal Court of Australia Act 1976 (Cth) s 23Jackson v Sterling Industries Limited (1987) 162 CLR 612 cited, applied
LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 148 ALR 247 (FC) at 265 cited, applied
Beach Petroleum NL v Johnson (1992) 9 ACSR 404 cited, applied
Ninemia Maritime Corporation v Trave [1983] 1 WLR 1412 (CA) cited
Australian Competition and Consumer Commission v Top Snack Foods Pty Ltd [1997] FCA 380 cited
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 applied
Northcorp Limited v Allman Properties (Australia) Pty Ltd [1994] 2 QdR 405 citedAUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v SINGAPORE LIASON PTY LTD, LANCE FREDERICK SHAW ALSO KNOWN AS HASSAN MOHAMMADI, FAWZIAH RAHMAN, MATTHEW FERGUSON SHAW, GRAEME ROSS KOVALEVSKY, JOHN WILLIAM HOWARD AND BRIAN LUCAS PERRY
NO QG139 OF 1998COOPER J
BRISBANE
31 MARCH 1999
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QG139 OF 1998
BETWEEN:
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
ApplicantAND:
SINGAPORE LIASON PTY LTD (ACN 068 427 172)
First RespondentLANCE FREDERICK SHAW ALSO KNOWN AS HASSAN MOHAMMADI
Second RespondentFAWZIAH RAHMAN
Third RespondentMATTHEW FERGUSON SHAW
Fourth RespondentGRAEME ROSS KOVALEVSKY
Fifth RespondentJOHN WILLIAM HOWARD
Sixth RespondentBRIAN LUCAS PERRY
Seventh RespondentJUDGE:
COOPER J
DATE OF ORDER:
31 MARCH 1999
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1. The application for interlocutory relief against the third respondent is dismissed.
2.The applicant pay the third respondent’s costs of and incidental to the application for interlocutory relief, including reserved costs, to be taxed if not agreed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QG139 OF 1998
BETWEEN:
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
ApplicantAND:
SINGAPORE LIASON PTY LTD (ACN 068 427 172)
First RespondentLANCE FREDERICK SHAW ALSO KNOWN AS HASSAN MOHAMMADI
Second RespondentFAWZIAH RAHMAN
Third RespondentMATTHEW FERGUSON SHAW
Fourth RespondentGRAEME ROSS KOVALEVSKY
Fifth RespondentJOHN WILLIAM HOWARD
Sixth RespondentBRIAN LUCAS PERRY
Seventh Respondent
JUDGE:
COOPER J
DATE:
31 MARCH 1999
PLACE:
BRISBANE
REASONS FOR JUDGMENT
On 2 November 1998 the applicant filed an application seeking injunctive and other relief against the respondents. The applicant claimed that the first respondent was acting in contravention of various provisions of the Corporations Law (“the Law”) and the Australian Securities and Investments Commission Act 1989 (Cth) (“the ASIC Law”) in dealing with interests in and promoting participation in a securities scheme. So far as the second to seventh respondents are concerned, the applicant alleges that each was carrying on a securities business or an investment advice business in contravention of the Law and that in the conduct of those businesses and in the dealing with or promoting of the scheme, these respondents were involved in the contravention of provisions of the Law and the ASIC Law relating to dealing in securities and the provision of financial services, making false and misleading statements in respect of securities, engaging in referral selling and engaging in pyramid selling of securities.
On 16 December 1998, the first, second, fourth, sixth and seventh respondents agreed to undertakings in the following form :
“Each of the Second, Fourth, Sixth and Seventh Respondents, without admission, howsoever, undertakes to the Court that:
1.he will make, file in these proceedings and serve on the Applicant by Friday, 22 January 1999, an affidavit or affidavits containing the following information and annexing true copies of the following documents:
(a)his banking statements and records from 1 July 1997 to the date of this order;
(b)a statement of his assets and liabilities;
(c)the present location, so far as known or available to him of any monies paid to him by any person under or relating to either of the ‘F.I.R.E. - Family Internet Real Estate’ scheme and the ‘Matrix Marketing Plan’ referred to in the application including, but not limited to, the details of any bank account in which such monies may still be deposited and the description of any real property purchased or agreed to be purchased the costs of which, or any deposit on which, was met, wholly or partly, by any such money.
2. until trial or earlier order he will not dispose of, encumber or otherwise deal with any of his assets as at the date of this order (whether in Australia or elsewhere) or remove any such asset now in Australia, other than to meet his usual, reasonable living expenses (including any recurrent repayment obligations to any financier) and his costs and outgoings of and incidental to these proceedings.”
Prior to 16 December 1998 the fifth respondent provided undertakings in terms of the interlocutory relief sought against him in the original application.
The third respondent, on 16 December 1998, provided the following undertaking :
“... the third respondent, without admission of liability, undertaking to the Court that, until 4.15 pm on 17 December 1998, without the prior agreement of the applicant or, failing such agreement, the leave of the Court, she will not sign any cheque drawn upon any bank account of the first respondent, or draw upon any bank account operated by the first respondent or any deposit in any bank account to the first respondent’s credit, other than to pay the first respondent’s usual business creditors, the usual wages of its employees, its landlord in respect of its business premises and the first respondent’s costs and outgoings of and incidental to these proceedings.”
She declined to provide any other undertakings.
On 18 December 1998 the applicant sought interlocutory relief against the third respondent seeking orders in terms of the undertakings given by the second, fourth, sixth and seventh respondents. The applicant also sought an injunction restraining the third respondent from operating the first respondent’s bank accounts other than in terms of the undertaking previously given by her. By the time of the hearing, the third respondent’s authority to operate any of the first respondent’s bank accounts had been withdrawn by resolution of the board of directors of the first respondent.
In order to identify the case alleged against the respondents, and in particular against the third respondent, the applicant filed points of claim on 15 December 1998. As against the first respondent, it is alleged :-
“... [The first respondent:]
(a)at all material times was and remains a company duly incorporated according to law;
(b)was incorporated in the State of New South Wales on 28 February 1995;
(c)from on or about 1 September 1997 traded as Family Internet Real Estate - F.I.R.E.;
(d)carried on, and remains carrying on, the promotion of and participation in a property purchase plan involving multi-level, matrix-style commission-based referral selling (‘the scheme’);
(e)has a total issued share capital as follows:
(i)65,000 C Class shares;
(ii)50,000 D Class shares;
(iii)2 Ordinary shares;
(f)as at in or about September 1998, was the owner of real property situate at :
(i)14 Syria Street, Beenleigh in the State of Queensland, more particularly described as Lot 3 on Registered Plan No 116167 and having an address for service of all notices at care of 114/138 Hansford Road, Coombabah in the State of Queensland (an address utilised as a residence by the Second Respondent). On or about 23 April 1998, the First Respondent gave a registered bill of mortgage over the Syria Street property to Roynaur Investments Pty Ltd;
(ii)66 Spanns Road, Beenleigh in the State of Queensland, more particularly described as Lot 196 on Registered Plan No 140873 and having an address for service of all notices care of PO Box 411, Surfers Paradise in the State of Queensland (an address noted on the Second Respondent’s business card.) On or about 9 March 1998, the First Respondent gave a registered bill of mortgage over the Spanns Road property to John Walter Skalla;
(iii)Lot 104, 15 Orchard Avenue, Surfers Paradise in the State of Queensland, more particularly described as Lot 104 on BUP 3410 and having an address for service of all notices at care of Top of the Mark Unit 514, Orchard Avenue, Surfers Paradise (an address adjacent to where both the Second and Third Respondents are known to reside). On or about 10 October 1997, the Second Respondent granted a registered bill of mortgage over the said Orchard Avenue property to Michael Jacobs;
(iv)Lot 105, 15 Orchard Avenue, Surfers Paradise in the State of Queensland, more particularly described as Lot 105 on BUP 3410, having an address for service of all notices at care of Top of the Mark Unit 514, Orchard Avenue, Surfers Paradise (an address adjacent to where the Second and Third Respondents are known to reside). On or about 26 May 1997, the First Respondent granted a registered bill of mortgage over the said Lot 105, Orchard Avenue property to Michael Jacobs;
(v)8 Ludcke Lane, Beenleigh in the State of Queensland, more particularly described as Lot 5 on BUP 5726, having an address for service of all notices at PO Box 411, Surfers Paradise (an address which is noted on the Second Respondent’s business card). On or about 27 April 1996, the first Respondent granted a registered bill of mortgage over the said Ludcke Lane property to Roynaur Investments Pty Ltd;
(vi)Lot 573, 3 James Cagney Close, Parkwood in the State of Queensland, more particularly described as Lot 573 on Registered Plan No 845940, having an address for service of all notices at Unit 114, 138 Hansford Road, Coombabah (an address where the Second Respondent is known to reside). On or about 25 February 1998, the First Respondent granted a registered bill of mortgage over the said James Cagney Close property to the Corporate Trustees of the Diocese of Grafton;
(vii)Lot 574, 3 James Cagney Close, Parkwood in the State of Queensland, more particularly described as Lot 574 on Registered Plan No 845940, having an address for service of all notices at Unit 114, 138 Hansford Road, Coombabah (an address where the Second Respondent is known to reside). On or about 25 February 1998, the First Respondent granted a registered bill of mortgage over the said James Cagney Close property to the Corporate Trustees of the Diocese of Grafton;
(viii)Lot 136, 180 Greenacre Drive, Parkwood in the State of Queensland, more particularly described as Lot 136 on Registered Plan No 903826, having an address for service of all notices care of Unit 114, 138 Hansford Road, Coombabah in the State of Queensland (an address where the Second Respondent is known to reside). On or about 25 February 1998, the First Respondent granted a registered bill of mortgage over the said Greenacre Drive property to the Corporate Trustees of the Diocese of Grafton;
(ix)Lot 137, 182 Greenacre Drive, Parkwood in the State of Queensland, more particularly described as Lot 137 on Registered Plan No 903826, having an address for service of all notices care of Unit 114, 138 Hansford Road, Coombabah in the State of Queensland (an address where the Second Respondent is known to reside). On or about 25 February 1998, the First Respondent granted a registered bill of mortgage over the said Greenacre Drive property to the Corporate Trustees of the Diocese of Grafton.
(g)has, since at least 1 September 1997, been carrying on a securities business within the meaning of section 93 of the Corporations Law (‘the Law’) without a licence in contravention of section 780 of the Law;
(h)has, since at least 1 September 1997, been carrying on an investment advice business within the meaning of section 93 of the Law without a licence in contravention of section 781 of the Law;
(i)has, in the respects pleaded herein, insofar as it relates to conduct prior to 1 July 1998, been offering for subscription and issuing invitations subscribing for securities and/or prescribed interests without lodging a prospectus in contravention of sections 1018 and 1016 of the Law;
(j)has, in the respects pleaded herein, insofar as it relates to conduct after 1 July 1998, operated a managed investment scheme within the meaning of that term as defined in section 9 of the Law whilst unregistered and in contravention of the provisions of Chapter 5C of the Law;
(k)has, in the respects pleaded herein, insofar as it relates to conduct after 1 July 1998, operated a ‘trading scheme’ within the meaning of that term as defined in section 12DK(5) of the ASIC Act (ASIC Law);
(l)has, in the respects pleaded herein:
(i)engaged in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive in contravention of sub-section 12DA(1) of the ASIC Law;
(ii)made false and misleading representations in connection with the supply or possible supply of financial services, or in connection with the promotion by the means of the supply or use of financial services in contravention of section 12DB of the ASIC Law;
(iii)engaged in referral selling in contravention of section 12DH of the ASIC Law; and
(iv)engaged in pyramid selling of securities in contravention of section 12DA of the ASIC Law.”
.....
The First Respondent’s contravention of the Law
17.The conduct of the First Respondent in promoting the scheme is in contravention of the Law.
18.The Respondent’s [sic] scheme amounts to a ‘participation interest’ within the meaning of that term as formerly defined in section 9 of the Law. By entering into a contract of sale and/or participating in the Respondent’s multi-level matrix marketing plan, investors acquire a participation interest within section 9 of the Law and thus a ‘prescribed interest’ and ‘securities’ for the purposes of section 9 and 92 of the Law as:
(a)they obtain a right to participate in profits, assets or realisation of any financial undertaking or scheme;
(b)they are all led to expect benefits in the form of commissions and interest in future real property.
19.Further, the scheme constitutes a ‘managed investment scheme’ within the meaning of that term as defined in section 9 of the Law in that:
(a)investors have contributed money to acquire rights to benefits produced by the scheme; and
(b)funds raised from the public are paid into the account of the First Respondent to be used by the First Respondent for furtherance of the scheme; and
(c)individuals do not have the day-to-day control of the operation of the scheme.
20.The promotional material and the manner in which the scheme is promoted is conduct that is misleading or deceptive or is likely to mislead or deceive because:
(a)the representations contained in the material are likely to induce persons to subscribe for securities, and indeed investors have on the strength of the representations entered into contracts for the purchases of real property;
(b)the First Respondent by the Second Respondent represents that the First Respondent is the owner of all properties they sell through their plan and that they (meaning the First Respondent) have to own the property first before they sell it to members of the matrix;
(c)the Second Respondent represented that if the First Respondent goes bust, investors’ moneys can always be returned if the investors have entered into a contract;
(d)also refer to paragraph 22 herein.
The First Respondent’s contravention of the ASIC Law
21.By reasons of the matters referred to herein, the Applicant contends that the First Respondent’s conduct amounts to ‘financial services’ which have been supplied in relation to a ‘financial product’ within the meaning of that term as defined in section 12BA(b) of the ASIC Law. A financial product is a ‘security’ which in turn is defined by the Law as falling within the former definition of ‘participation interest’ in section 9 and the present definition of ‘managed investment scheme’ within section 9 of the Law.
22.The First Respondent’s conduct in promoting the scheme is in breach of sections 12DA and 12DB of the ASIC Law as it falsely represents that its scheme:
(a)uses its own funds to purchase land, build new homes and purchase existing homes;
(b)investors can buy a second house with a nominal deposit as low as $100.00;
(c)can earn investors up to $156,000.00 of commission in one year;
(d)that it may cost as little as $25.00 to own a second home;
(e)that every transaction of the First Respondent is scrutinised by the Australian Treasury;
(f)that the homes that are built by the First Respondent are particularly designed to be maintenance-free, so much so that the Queensland Government Housing Commission is purchasing several this year for its own tenant program;
(g)that the First Respondent purchases land, builds new homes and purchases existing homes using its own investment capital and at no time are purchasers’ funds used to construct any property;
(h)that on entering the scheme investors have a legal contract on real property.
23.Further, the First Respondent is in contravention of section 12DH of the ASIC Law as it actively promotes the payment of commission to investors for referring new investors to the First Respondent or otherwise assisting the First Respondent to supply financial services to other investors.
24.In breach of section 12DK, the First Respondent offers investors the prospect of receiving commissions for introducing other persons to become participants in the First Respondent’s scheme.
25.The provisions of section 12DK are couched in very wide terms. The scheme being promoted by the First Respondent would fall within the definition of ‘trading scheme’ pursuant to section 12DK(5) of the ASIC Law.”
As against the third respondent, it is alleged :
“3. Fawziah Rahman (‘the Third Respondent’):
(a)on 28 February 1995 and at all material times thereafter until 29 June 1998 was a director of the First Respondent;
(b)at all material times was and remains the owner of one Ordinary Class share in the First Respondent;
(c)at all material times was and remains a major shareholder in Finaviserv Pty Ltd (‘Finaviserv’), which company remains the owner of 20,000 C Class shares in the First Respondent;
(d)was and remains a signatory of bank accounts operated in the name of the First Respondent, namely:
(i)Commonwealth Bank of Australia cheque account ‘Singapore Liason Pty Ltd’, Account No 443210080881;
(ii)Commonwealth Bank of Australia cash management account ‘Singapore Liason Pty Ltd’, Account No 443210102569 (‘the accounts’);
(e)facilitated the conduct of the affairs of the First Respondent in ways perceived to suit the interests of the First Respondent and in the furtherance of the scheme in detriment to investors, namely:
(i)executing contracts to purchase property;
(ii)executing loan documentation for loans made to the First Respondent;
(iii)granting security for such loans over assets owned by the First Respondent;
(iv)guaranteeing the performance of the First Respondent’s obligations pursuant to such loans;
(f)was and is an officer, employer, servant and/or agent of the First and Second Respondents and acted in the respects pleaded herein within the scope of her actual or apparent authority from the First and Second Respondents and present directors of the First Respondent;
(g)was not a licensed person for the purposes of sections 780 and 781 of the Law.”
The evidence which the applicant relied upon to support these allegations was transcripts of examinations which took place under s 19 of the ASIC Law and documents seized by the applicant in relation to the first respondent and the operation of the scheme.
The applicant gave particulars of the evidence it contended demonstrated the third respondent’s involvement in the scheme :
“The Third Respondent’s own evidence given in the course of a section 19 examination demonstrates that she is involved in contraventions by the First Respondent as follows :-
(a)she resides at an address owned by the First Respondent, Unit 513, Top of the Mark, Surfers Paradise: page 7;
(b)guaranteed on behalf of the First Respondent a loan to the Diocese of Grafton for a substantial sum of money ($460,000.00): page 9;
(c)such a loan was to purchase property to build houses: page 10;
(d)she is unlicensed for the purposes of sections 780 and 781 of the Law;
(e)it was the Third Respondent’s idea to set up the First Respondent with her son; page 14;
(f)she became a director of the First Respondent on the advice of her husband, the Second Respondent: page 17;
(g)she is the signatory to bank accounts held in the name of the First Respondent: page 18;
(h)the First Respondent owns the property in which she and the Second Respondent reside: page 21;
(i)suspiciously does not know who gave her her shares in the First Respondent: page 22;
(j)confirms that the Second Respondent is a deemed director of the First Respondent: page 27;
(k)contrary to representations made by the Second Respondent, asserts that the First Respondent has no assets overseas: page 28;
(l)notwithstanding she is a past director of the First Respondent, as a shareholder she allows it to still promote the scheme notwithstanding she does not really understand it: pages 28 and 219;
(m)has been involved in the signing of contracts with her husband: page 30;
(n)she takes the advice of her husband as to the location of development sites for properties to be purchased and executed contracts on behalf of the First Respondent for the benefit of herself and her sons: page 31.
.....
(p)has been to site inspections of property owned by the First Respondent: page 34;
(q)the Third Respondent has signed contracts under company seal on behalf of the First Respondent;
(r)notwithstanding the Third Respondent does not appear to fully understand the terms of the scheme, she still signed contracts on its behalf and allowed the First Respondent to continue to promote it notwithstanding she finds the scheme confusing;
(s)notwithstanding the Third Respondent is no longer a director, she still actively promotes the First Respondent;
(t)the Third Respondent still tells people about buying properties and has seen the advertisements promoting the First Respondent’s scheme being advertised by witnessing the continued advertising of the First Respondent’s scheme, the Third Respondent is directly or indirectly concerned in the promotion;
(u)the Third Respondent is still a signatory on the First Respondent’s bank accounts and is still signing cheques on its behalf for payment of bills;
(v)the Third Respondent is expressly referred to in the promotional material as a director from Singapore who is resident in Australia;
(w)the Third Respondent with the Fifth Respondent decided commissions payable under the scheme;
(x)since incorporation, the following amounts have been transferred overseas for the benefit of the Third Respondent:
(i)$2,604.00 to Singapore by the First Respondent on 17 March 1997;
(ii)$1,748.00 to Singapore by the First Respondent on 14 January 1997;
(iii)$1,834.00 to Singapore by the First Respondent on 19 August 1996.”
The applicant submitted that there was a serious question to be tried that the first respondent and/or the third respondent had contravened the Law and the ASIC Law, or that the third respondent had been knowingly concerned in or had aided, abetted, counselled or procured a contravention by the first respondent. Further, the applicant submitted that the balance of convenience was in favour of the making of the orders sought so that funds were available to pay any money found to be repayable by or recoverable from the third respondent.
By its application the applicant seeks interlocutory relief in the nature of the disclosure order and the freezing of assets pursuant to s 12GE and s 12GN respectively of the ASIC Law (paragraphs 18 and 19 of the application filed 2 November 1998). On the hearing of the application it was sought to sustain such orders as being within the power of the Court pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) and/or alternatively under s 1324, s 1323 and/or s 1114 of the Law.
The proceedings, in so far as they allege breaches by the first respondent of s 12DA, s 12DB, s 12DH and s 12DK of the ASIC Law, must relate to conduct which occurred on and after 1 July 1998, the date upon which those provisions commenced to operate. Similarly, to the extent that relief is sought against the third respondent for contravention of s 12DA, s 12DB, s 12DH and s 12DK the contravening conduct must have occurred on or after 1 July 1998.
The only evidence of conduct which may contravene these sections is a print-out of material from a web site of Family Internet Real Estate which contains details of the matrix marketing plan. The printout bears the date 2 September 1998. The contracts and disclosure statements exhibited to the affidavit of Rodney James Peters filed and relied upon by the applicant were entered into in the period 5 July 1997 to and including 21 April 1998.
There is no evidence of any conduct on the part of the third respondent since her resignation as a director of the first respondent on 29 June 1998 which would constitute a contravention of s 12DA, s 12DB, s 12DH or s 12DK of the ASIC Law. Nor is there any admission in her s 19 examination of conduct since 1 July 1998 which would constitute such a contravention.
On the hearing it was contended that the third respondent had engaged in conduct which would constitute aiding, abetting, counselling or procuring the first respondent to contravene s 12DA, s 12DB, s 12DH or s 12DK of the ASIC Law or being knowingly concerned or a party to such a contravention. However, the only material which links the third respondent to the offer or solicitation on the Internet website on 2 September 1998 is her shareholding in the first respondent and the fact that she was a signatory on the bank account of the first respondent until that authority was withdrawn on 16 December 1998. Those two circumstances do not, in my view, give rise to a serious question to be tried that the third respondent herself contravened, or aided, abetted, counselled or procured, or was knowingly concerned in, a contravention by the first respondent, of s 12DA, s 12DB, s 12DH or s 12DK of the ASIC Law since 1 July 1998. In those circumstances, no question of interlocutory relief of the type sought by the applicant arises under s 12GD and s 12GE of the ASIC Law. Nor in my view is an entitlement to interlocutory relief made out under s 12GN of the ASIC Law.
The question then arises as to whether or not the applicant may obtain orders of the type sought under s 1324(1), s 1323 or s 1114 of the Law or s 23 of the Federal Court of Australia Act 1976 (Cth).
I am satisfied that the Court has both the jurisdiction and the power to grant interlocutory relief of the type sought, which is in the nature of a Mareva injunction, under s 23 of the Federal Court of Australia Act 1976 (Cth) and s 1324 of the Law provided the preconditions for the exercise of the power are made out: Jackson v Sterling Industries Limited (1987) 162 CLR 612 at 621, 625, 641 - 642; LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 148 ALR 247 (FC) at 265 - 266; Beach Petroleum NL v Johnson (1992) 9 ACSR 404 at 405 - 406.
Whether the jurisdiction is sourced in s 23 or s 1324, the discretion to make an order is one which must be exercised judicially and not in an arbitrary manner. The nature of the discretion takes its colour from the fact that the power is purpositive and is intended to prevent a defendant or respondent disposing of its actual assets so as to frustrate the process of the court by depriving the plaintiff or applicant of the fruits of any judgment obtained in the action: Jackson v Stirling Industries Ltd at 625. Novelty of form of the order is no objection to the validity of the order where the exigencies of the case call for an order which will protect the process of the court against frustration: Jackson v Stirling Industries Ltd at 621. Where s 1323 of the Law is concerned, the discretion is to be exercised having regard to the desirability of protecting the interests of people to whom the respondent may be or become liable to pay monies: Beach Petroleum NL v Johnson at 406. In the present application the applicant seeks, pursuant to s 1324 and/or s 1323 and s 1114 of the Corporations Law, a final order against the third and other respondents that she repay any or all monies obtained by any respondent from any third party in consequence of any respondent having acted in contravention of the Corporations Law (paragraph 15 of the application).
It is not sufficient that the applicant for interlocutory relief asserts that it fears disposition, transfer or dissipation of assets and wishes to see if there are any other assets other than those disclosed in the proceedings which may be disposed of: Ninemia Maritime Corporation v Trave [1983] 1 WLR 1412 (CA) at 1419. The question is whether there are reasonable grounds for such a belief and whether the circumstances otherwise call for the making of an order: Australian Competition and Consumer Commission v Top Snack Foods Pty Ltd [1997] FCA 380 per Tamberlin J at 5.
The formulation of what is required to enliven the jurisdiction to make the order was described by Gleeson CJ in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321 - 322 :
“The remedy is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant’s absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.”
That formulation was applied by von Doussa J in Beach Petroleum NL v Johnson at 405 and by the Court of Appeal in Queensland in Northcorp Limited v Allman Properties (Australia) Pty Ltd [1994] 2 QdR 405 at 407. I intend to apply it in the present circumstances.
For the purpose of the present application I am prepared to find that the first limb identified by Gleeson CJ has been made out. There is considerable force in many of the submissions made by counsel for the third respondent as to the relevance and sustainability of the circumstances alleged against the third respondent on the basis of the material put before the Court. However, on the basis that until 29 June 1998 she was a director of the first respondent and had some involvement in its business activities, I am prepared to find that the applicant has made out a prima facie case of the third respondent being knowingly concerned in a contravention of the Law and the ASIC Law by the first respondent.
In my view, the applicant fails to make out the second limb so as to justify the granting of the interlocutory relief sought. There is no evidence that the third respondent has received any money from the first respondent or any third party in respect of the scheme pleaded in paragraphs 9 - 16 inclusive of the applicant’s points of claim. Nor is there any evidence that the third respondent has or intends to dispose of, transfer or dissipate any of her assets which would have the effect of defeating any judgment the applicant may recover against her. In the present case the absence of such material is of some significance because the applicant has conducted a number of s 19 examinations of officers and agents of the first respondent, including an examination of the third respondent and others who had dealings with the first respondent, has had access to the books and records of the first respondent, including its financial records, and has had the benefit of the materials provided by the other respondents under the undertakings and consent orders given and made in December 1998. The third respondent’s involvement in the scheme, as appears from the transcript of her s 19 examination and the nature of the scheme itself having regard to the properties acquired, developed and held by the first respondent as part of the scheme, are not such as would entitle the inference to be drawn that there is a real risk of her disposing of, dissipating or transferring her assets or that she in fact holds any significant assets of her own.
In all of the circumstances, I am not persuaded that this is a case where the serious steps involved in the making of Mareva orders is justified or made out on the materials.
The application is dismissed.
There is no reason why, the application having been pressed against the third respondent and having failed, costs should not follow the event.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.
Associate:
Dated: 31 March 1999
Counsel for the Applicant:
E M O’Reilly SC and M K Stunden
Solicitor for the Applicant:
A E Stumm
Counsel for the Respondent:
D O J North SC
Solicitor for the Respondent:
Adamson Bernays Kyle & Jones
Date of Hearing:
18 December 1998
Date of Judgment:
31 March 1999
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