Australian Securities Commission v Cooke - [1996] FCA 1101

EQUITY - injunctions - interim - letter to unit holders offering gratis one for one issue in offshore trust - whether serious question letter constitutes invitation to subscribe without prospectus - whether "excluded issue exemption" applicable - balance of convenience

CORPORATIONS LAW - receiver and manager - whether appointment appropriate

Corporations Law, s9, s66(2)(c), s92, s1018, s1064, s1065, s1114, s1323, s1324(4)
Corporations Regulations, reg7.12.04

Adsteam Building Industries Pty Ltd v Queensland Cement and Lime (1984) 2 QdR 1
Attorney General (New South Wales) v Australian Fixed Trusts Ltd (1974) 1 NSWLR 110
Beach Petroleum NL v Johnson (1992) 9 ACSR 404
Broken Hill Pty Company Limited v Bell Resources Limited (1984) 2 ACLC 157
CAC v M.G. Securities Australia Ltd (1974) ACLC 27,761
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
NCSC v Monsoon Nominees Pty Ltd (1990) 3 ACSR 361
O'Brien v Melbank Corporations Ltd (1992) 10 ACLC 197
Wade v A Home Away Pty Ltd (1981) VR 475

AUSTRALIAN SECURITIES COMMISSION v ALLAN COOKE and ETHICAL TECHNOLOGY BROKERS PTY LTD
NO WG 3038 OF 1996

CORAM:R D NICHOLSON J
PLACE:PERTH
DATE:23 OCTOBER 1996

IN THE FEDERAL COURT OF AUSTRALIA )
WESTERN AUSTRALIA DISTRICT REGISTRY )

GENERAL DIVISION ) NO WG 3038 OF 1996

B E T W E E N: AUSTRALIAN SECURITIES COMMISSION

Applicant

and

ALLAN COOKE

First Respondent

and

ETHICAL TECHNOLOGY BROKERS PTY LTD

Second Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:     R D NICHOLSON J
DATE OF ORDER:         23 OCTOBER 1996
WHERE MADE:            PERTH

THE COURT ORDERS THAT:

Until the hearing of this application or further order, the first respondent by himself or his servants, agents or otherwise be and is restrained from issuing invitations to subscribe for securities in the Enviro Trust, or being in any way directly or indirectly knowingly concerned in or party to the making of such an invitation, unless the making of the invitation is authorised by the Corporations Law ("CL").

Until the hearing of this application of further order, the first respondent by himself or his servants, agents or otherwise be and is restrained from being in any way directly or indirectly knowingly concerned in or party to the issue of securities in the Enviro Trust, unless the issue of those securities is authorised by the CL.
Until the hearing of this application or further order, the second respondent by itself, its officers, servants, agents or otherwise be and is restrained from issuing invitations to subscribe for securities in the Enviro Trust, or being in any way directly or indirectly knowingly concerned in or party to the making of such an invitation, unless the making of the invitation is authorised by the CL.

Until the hearing of this application or further order, the second respondent by itself or its directors, servants, agents or otherwise be and is restrained from being in any way directly or indirectly knowingly concerned in or party to the issue of securities in the Enviro Trust, unless the issue of those securities…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1996] FCA 1101
Decision Date: 23 OCTOBER 1996

CaseChat Overview and Summary

The Australian Securities Commission (Applicant) brought an urgent motion for interim orders against Allan Cooke and Ethical Technology Brokers Pty Ltd (Respondents) under the Corporations Law (the CL). The application sought interim injunctions and the appointment of a receiver and manager. The interim injunctions were sought to restrain the Respondents from issuing invitations to subscribe for securities in an overseas trust. The application for the appointment of a receiver and manager was made under the CL s1323(1)(a) and (h)(ii). The Applicants argued that the Respondents had contravened CL ss1018 and 1065(1) by sending a letter to unit holders of the Earth Family Trust (EFT) inviting them to subscribe for units in an offshore trust, Enviro Trust. The Applicants submitted that the letter constituted an invitation to subscribe for securities in a corporation in contravention of the CL. The Applicants further argued that there was a serious question to be tried and that the balance of convenience favoured the making of the orders. The Applicants contended that the appointment of a receiver and manager was necessary to protect the interests of unit holders in EFT, particularly the minority unit holders. The Applicants submitted that there was a real risk the assets of the EFT would be dissipated offshore to a tax haven unless a receiver and manager was appointed. In response, the Respondents argued that the letter did not fall within the phrase "offer for subscription or purchase, or issue invitations to subscribe for or buy" a prescribed interest in CL 1065(1). The Respondents further argued that the exemption to the definition of "prescribed interest" in par(c) applied and that there was no consideration paid or provided in respect of the issue or allotment. The Respondents also argued that the absence of a territorial nexus prevented the CL from applying. The Respondents submitted that the balance of convenience did not favour the making of the orders. In relation to the appointment of a receiver and manager, the Respondents argued that the appointment was a drastic step not to be taken lightly and that the deposit of shares provided a lesser remedy. Nicholson J found that the letter contained a solicitation to unit holders in EFT to receive the issue of a unit in Enviro Trust, and thus the letter contained an invitation to subscribe for units in Enviro Trust, in contravention of CL ss1018 and 1065(1). The Court held that the exemption to the definition of "prescribed interest" in par(c) did not apply and that the absence of consideration did not preclude the conclusion there was a serious issue to be tried. The Court further held that the absence of a territorial nexus did not prevent the CL from applying. The Court concluded that there was a serious question to be tried and that the balance of convenience favoured the making of the orders. In relation to the appointment of a receiver and manager, the Court held that the appointment was necessary to protect the interests of unit holders in EFT. The Court found that the deposit of shares did not provide a lesser remedy and that the appointment of a receiver and manager was appropriate. The Court made interim orders in terms of paragraphs 1 to 4 and 5 to 9 of the minute of proposed orders.

Orders