Australian Securities Commission v Cotham Ltd

[1992] FCA 541

IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY 1

GENERAL DIVISION 1 No. VG 3206 of 1992

IN THE MATTER of GOLDSEARCH LIMITED (A.C.N. 006 645 754)

B E T W E E N :

AUSTRALIAN SECURITIES COMMISSION

Applicant:

- and -

COTHAM LIMITED, JOHN LINDSAY MERITY and
GOLDSEARCH LIMITED

Respondents

Coram:	Olney J
Place:	Melbourne

Date : 14 July 1992

EX TEMPORE JUDGMENT

The matter before the Court arises on notice of motion given by the second and third respondents seeking an order that certain orders made by Jenkinson J on 9 July 1992 be discharged. The order made by Jenkinson J on 9 July was made ex parte on the application of the applicant and was based upon the affidavit of Stuart Clifford Dent sworn 9 July 1992. In that order, Jenkinson J restrained the first respondent (Cotham) and the second respondent (Merity), until further order, from exercising any voting rights attached to certain shares in the capital of	name of Cotham (the Cotham shares). The order further restrained	the third respondent (Goldsearch) which are registered in the
Cotham and Merity, until further order, from disposing of any of those shares or any interest in them and restrained Goldsearch from registering any transfer or transmission of any of them.
Central to the evidence before Jenkinson J was paragraph 8 of Dent's affidavit in which, to paraphrase, he deposes that immediately prior to the acquisition of the Cotham shares (which acquisition is not disputed to be an acquisition by Merity) Merity was entitled within the meaning of the Corporations Law to 2,621,000 further shares in Goldsearch which were registered in the name of Swartz Aronson Credit Limited (SAC).
The evidence adduced today has been in the form of oral testimony from Merity, and an affidavit of Leonard Respinger sworn on 13 July 1992. Both witnesses have been cross-examined. In addition, Dent has been cross-examined on his affidavit. Merity's evidence is a complete denial of having any interest in the SAC shares. Respinger has described his involvement with
the SAC shares and I do not propose to go into the details which have been canvassed at length both in the exhibits to the
affidavit and in cross-examination but in effect, Respinger says the shares are not Merity's.
It is necessary to be mindful of the stage that these proceedings have reached. The originating application was brought pursuant to section 737 of the Corporations Law. An ex parte application was made for an injunction or, as it is called in section 744, an interim order. The hearing of the applicant's application for

interlocutory relief is listed for 20 July 1992.

The principles upon which an interim order, whether it be in the nature of an ex parte order or an order made inter-parties under section 744 are essentially those principles that apply to the granting of interlocutory injunctive relief in ordinary civil proceedings; and so it is that the matters to which a judge must direct his attention, whether it be on an ex parte application or on an application to set aside an ex parte order, or indeed on the granting of interlocutory relief on an application inter- parties, are first that it must be ascertained whether there is

a serious question to be tried; and if there is, then the judge

must direct his attention to the balance of convenience to determine whether or not it is appropriate that pending the final resolution of the proceedings the ordinary rights of the parties should be interfered with.

In this matter, the facts are complex. Some of the main parties

have given evidence but it could not be said by any stretch of	the imagination that all of the relevant material that will need
to be investigated on the hearing of the substantive application is before the Court. The burden resting upon the applicant at this stage to support the intervention of the Court by way of injunction is to establish that there is a serious question to be tried.
I indicated during the course of hearing the evidence that I had some difficulty in accepting the evidence of Respinger. On a previous Occasion, in an examination under the Corporations Law
he gave evidence which lacked a degree of frankness. Some of his answers in cross-examination were unconvincing. He was unable to explain how in his affidavit he was able to refer in paragraph 3 to the name of the company from which SAC acquired its shares (Julmar) whereas in November he had said he had not heard of it. I find nothing helpful in Respinger's affidavit or his evidence.
That leaves the question of Merity's evidence. I do not propose to canvass the complex provisions of the Corporations Law which have been referred to by counsel for the applicant. It is, in
my opinion, sufficient to say that balancing the evidence of Dent
against that of Merity I am led to the conclusion that there is a serious issue of fact to be tried. The relationships between Merity, Hunters Lodge, Byrne & CO and other shareholding companies and Goldsearch are such that, given a strict application of the Corporations Law it may well be said that at the time the Cotham shares were acquired, Merity was entitled
within the meaning of the Corporations Law to the SAC parcel.
It is not my task to make a definitive finding of fact. If the evidence were clear, then I would not hesitate to make a finding, but the evidence is not clear. There is a wealth of other material which, in my opinion, would need to be before the Court before a definitive finding of fact could be made, and whilst Dent was prepared to concede quite properly, that there was no "direct evidence" to support the conclusion expressed in Paragraph 8 of his affidavit, the term "direct evidence" was not used as a term of art but rather to suggest something more than mere inference. The fact of the matter is that Courts do make findings based upon inference, and in appropriate circumstances inferences can be drawn from all of the surrounding circumstances and evidence. Although there is no evidence that shows that Merity is or was the registered owner of the Cotham shares, or that he is or was entitled to exercise voting powers or otherwise had the sort of influence over them that could be said to indicate that he was in effect the shareholder, there is evidence which, if it stands up, may justify the inference being drawn that his entitlement in respect of those shares and his interest within the meaning of the Corporations Law is such as to justify him being regarded as being entitled to them.
In my view, on the evidence before Jenkinson J, there was enough to support a finding that there was a serious question to be tried. Having heard the further evidence adduced, I am of the view, taking everything into account, that there remains a serious question of fact to be tried, and in the circumstances
it is appropriate that that question be tried. The question of
balance of convenience is in my view very heavily in favour of granting the injunction, and accordingly, I have come to the conclusion that nothing has been established in these proceedings thus far that would justify the discharging any of the orders made by Jenkinson J on 9 July 1992.
I note that the proceedings are listed for directions and for the
hearing of the applicant's interlocutory application for injunctive relief on 20 July 1992. The orders made by Jenkinson
J, are not confined by any time limitation and continue until
further order. It is therefore unnecessary for me to make any order extending them. I propose therefore to dismiss the application of the first and second respondents.
I think at this stage of the proceedings I would prefer to reserve the question of costs, so that it can be appropriately dealt with when the interlocutory application for injunction is argued in full. The application will be dismissed and the costs of both parties will be reserved.

I certify that this and the preceding 5 pages is a true copy of the Ex Tempore Judgment of the Honourable Mr. Justice Olney

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Associate: 3- ( &C/ 4-

Dated: 2s. v9 - I??-