Australian Securities Commission v EBC Zurich AG
[1995] FCA 1010
•14 DECEMBER 1995
CATCHWORDS
CORPORATIONS - Shares - Australian Securities Commission - Secondary notices requiring information concerning interests in shares - Non-compliance by person served - Non-compliance with substantial shareholder provisions of Corporations Law - Nature of relief.
PRACTICE AND PROCEDURE - Service outside the jurisdiction - Substituted service.
Corporations Law, ss 613(1), 709, 719, 722(1), 741, 742, 744.
Federal Court Rules, O 1, r 4; O 7, r 9; O 8, rr 1-5.
Re North Broken Hill Holdings Ltd (1986) 10 ACLR 270, var'd sub nom Crosley Ltd v North Broken Hill Holdings Ltd [1987] VR 119.
Brunswick NL v Blossomtree Pty Ltd (1992) 7 WAR 226.
AUSTRALIAN SECURITIES COMMISSION v EBC ZURICH AG & ORS
NG 3461 of 1995
Sackville J.
Sydney
14 December, 1995
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3461 of 1995
GENERAL DIVISION )
BETWEEN:
AUSTRALIAN SECURITIES COMMISSION
Applicant
AND:
EBC ZURICH AG
First Respondent
NATIONAL NOMINEES LIMITED
Second Respondent
DOME RESOURCES NL
Third Respondent
ALLEGIANCE MINING NL
Fourth Respondent
CORAM: SACKVILLE J.
PLACE: SYDNEY
DATE: 14 DECEMBER, 1995
MINUTES OF ORDER
THE COURT:
ORDERS that, subject to paragraph 5 of these orders, EBC Zurich AG ("EBC") comply, within 7 days of the date of these orders, with the two Secondary Notices dated 18 August 1995, which relate to the parcel of 6,611,000 ordinary 20 cent fully paid shares in the issued capital of Dome Resources NL ("Dome") held by National Nominees Limited ("National") on behalf of EBC ("the Dome Parcel").
ORDERS that, subject to paragraph 6 of these orders, EBC comply, within 7 days of the date of these orders, with the Secondary Notices dated 18 August 1995, which relate to the parcel of 2,680,000 ordinary 20 cent fully paid shares in the issued capital of Allegiance Mining NL ("Allegiance") held by National on behalf of EBC ("the Allegiance Parcel").
ORDERS that, subject to paragraph 5 of these orders, EBC
give to Dome within 7 days of the date of these orders, a written notice which complies with section 709(3) of the Corporations Law.
ORDERS that, subject to paragraph 6 of these orders, EBC give to Dome, within 7 days of the date of these orders, a written notice which complies with section 709(3) of the Corporations Law.
ORDERS that, upon the expiration of 7 days from the date of these orders, if EBC has failed to comply with paragraphs 1 and 3 of these orders, then the Dome Parcel shall vest in the Australian Securities Commission ("ASC") until sold by it pursuant to these orders.
ORDERS that, upon the expiration of 7 days from the date of these orders, if EBC has failed to comply with paragraphs 2 and 4 of these orders, then the Allegiance Parcel shall vest in the ASC until sold by it pursuant to these orders.
ORDERS that, upon the expiration of two months from the date of these orders, the ASC shall, subject to the succeeding paragraphs of these orders, proceed to sell any shares vested in it by virtue of these orders ("the Relevant Shares") in such manner and on such terms as it thinks fit.
DIRECTS that, before any sale of the Dome Parcel, the ASC give to Dome 14 days' prior notice of the number of shares to be sold, the proposed manner of sale and the price at which it is proposed to offer the shares for sale.
GRANTS liberty to Dome to apply on 24 hours notice with respect to the ASC's proposals for sale of the Dome Parcel.
10.ORDERS that, subject to paragraph 11 of these orders, any proceeds of the sale of the Relevant Shares be applied to the payment of the ASC's costs (to the extent that they remain unpaid), including any investigation costs incurred under section 91 of the ASC Law and any costs of and incidental to the sale of the Relevant Shares, and then to the costs of Dome and the costs of National (to the extent that they remain unpaid). The balance of the proceeds should be dealt with in accordance with s.577 and Part 9.7 of the Corporations Law.
11.ORDERS that, subject to any further order of the Court, the ASC is at liberty to decline to make any payments out of the proceeds of sale of the Relevant Shares to any person claiming entitlement to the whole or a part of the proceeds unless that person provides the information requested by the relevant Secondary Notice referred to in paragraphs 1 and 2 hereof, information regarding the
basis of that person's entitlement to the proceeds and an explanation of that person's failure to provide the information earlier.
12.GRANTS liberty to any person, including the respondents, to apply for relief against these orders during a period of two calendar months from the date of the order herein.
13.ORDERS that EBC pay the costs of the ASC, Dome and National of these proceedings.
14.DIRECTS, pursuant to Federal Court Rules, Order 7, r.9(2), that the application and supporting affidavit delivered to Freehill Hollingdale & Page should be taken to have been served on EBC on 29 August 1995.
15.CONFIRMS, pursuant to Federal Court Rules, Order 8, r.2(4), service of these proceedings on EBC outside Australia.
16.DIRECTS that the ASC notify EBC of the terms of these orders by facsimile directed to the address referred to in the letter dated 31 August 1995 from EBC to the ASC, within three days of the date of these orders.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3461 of 1995
GENERAL DIVISION )
BETWEEN:
AUSTRALIAN SECURITIES COMMISSION
Applicant
AND:
EBC ZURICH AG
First Respondent
NATIONAL NOMINEES LIMITED
Second Respondent
DOME RESOURCES NL
Third Respondent
ALLEGIANCE MINING NL
Fourth Respondent
CORAM: SACKVILLE J.
PLACE: SYDNEY
DATE: 14 DECEMBER, 1995
REASONS FOR JUDGMENT
The Proceedings
In these proceedings, the applicant (the "ASC") seeks orders under ss.613, 741, 742 and 744 of the Corporations Law, in substance against the first respondent ("EBC"). The ASC claims that it is entitled to the relief by reason of EBC's contravention of s.722(1) of the Corporations Law, in that it failed to comply with secondary notices issued under s.719 of the Corporations Law in relation to shares held by it in the third respondent ("Dome") and in the fourth respondent ("Allegiance").
The ASC also claims that it is entitled to relief by reason of EBC's contravention of s.709 of the Corporations Law. The ASC says that EBC is a substantial shareholder of both Dome and Allegiance, but that it failed to give a notice to each company within two days of becoming aware of the interests by reason of which it became a substantial shareholder in each company.
Dome and Allegiance are companies incorporated in Australia. The second respondent ("National Nominees") is also incorporated in Australia and its ultimate holding company is the National Australia Bank Ltd. EBC is a public stock corporation incorporated in the Canton of Zurich in Switzerland. It carries on business in Zurich.
The relief sought by the ASC includes orders requiring EBC to comply with two secondary notices dated 18 August 1995, issued to EBC by the ASC, pursuant to s.719 of the Corporations Law. These notices relate to a parcel of 6,611,000 ordinary 20 cent fully paid shares in the issued capital of Dome, held by National Nominees on behalf of EBC (the "Dome parcel"). As at 4 August 1995, Dome had issued a total of 137,146,512 fully paid shares. In the event of a failure by EBC to comply with the orders, the ASC seeks orders that the Dome parcel should vest in the ASC.
The ASC seeks similar relief in relation to a parcel of 2,680,000 ordinary 20 cent fully paid shares in the issued capital of Allegiance, held by National Nominees on behalf of EBC (the "Allegiance parcel"). As at 10 August 1995, Allegiance had issued 57,500,005 shares. In the event of a failure by EBC to comply with the orders, the ASC seeks orders that the Allegiance parcel should vest in the ASC.
The Hearing
At the hearing Mr Lindsay SC appeared on behalf of the ASC. EBC, despite being served with initiating process in accordance with directions made by Foster J. on 28 August 1995 and despite being notified of the hearing, neither filed a notice of appearance nor attended the hearing. Consequently it offered no opposition to the orders sought by the ASC.
National Nominees did file a notice of appearance and was represented at the hearing by Ms Dunford. National Nominees did not oppose the orders being sought by the ASC and Ms Dunford confined her submissions to the question of National Nominees' costs.
Dome also filed a notice of appearance and was represented at the hearing by Mr Powers. Dome did not oppose the making of the orders sought by the ASC, except that Mr Powers submitted that, before what he described as the drastic remedy of "confiscation" was invoked, EBC should be ordered to dispose of the shares (see Corporations Law, s.744(7)). Mr Powers also made submissions on costs.
After hearing submissions from Mr Lindsay, I drew to the attention of the parties who appeared some questions in relation to the service effected on EBC. In particular, I queried whether an order for substituted service of initiating process on EBC had been made by Foster J. and, if not, whether fresh steps needed to be taken to ensure proper service. At a further hearing, Mr Lindsay made additional submissions on the question of service.
This decision is being handed down on the same day as my decision in proceedings entitled Australian Securities Commission v Bank Leumi Le-Israel, 14 December 1995, to which EBC is also a party. It is important to appreciate that the two cases do not involve the same issues. The present proceedings were, in substance, undefended. No expert evidence was adduced as to the effect under Swiss law of a Swiss corporation complying with secondary notices or the substantial shareholder requirements of the Corporations Law. Accordingly, the arguments considered in the Bank Leumi Case do not arise in these proceedings.
The Legislation
I do not propose to set out the relevant provisions of the Corporations Law at length. They are to be found in ss.708-711, 713 (substantial shareholding provisions); 717-719, 721-722 (primary and secondary notices); 741 (power of court with respect to defaulting shareholder), 742 (power of court where beneficial ownership of shares is not disclosed); 744 (miscellaneous provisions); 613 (remedial orders); 1324 (power of Court to grant injunctions); 1339, 1341 (power of ASC in relation to unclaimed property and shares). Some of the provisions are extracted in the Bank Leumi Case.
It is, however, appropriate to note that where a person fails to comply with a "primary" or "secondary" notice requiring particulars of a relevant interest in shares, the Court has power, on the application (inter alia) of the ASC to make such order or orders as it thinks just, including a "remedial order": s.742(2). Such an order may also be made if a substantial shareholder fails to notify the company of its shareholding: s.741(1). Remedial orders include restraining the disposal of an interest in the shares and vesting the shares in the ASC: s.613(1). The principal purpose of the legislation was explained by Fullagar J. in Re North Broken Hill Holdings Ltd (1986) 10 ACLR 270 (S.Ct. Vic/Fullagar J.), at 283:
"The object of the legislature was to create and maintain an informed market for public company shares, and it regards the object as so important that it provides for drastic consequences ensuing (in the discretion of the court) upon any blocking of information even for three business days after a request. (In the days of radiotelegraphy and telex machines and internationally-dialled telephones, it is no surprise to find that the short notice applies to all corporations wherever situated, again subject, as regards consequences, to the very wide discretion of the court.)"
This decision was overturned on appeal on the ground that the particular notice was defective, but the Full Court cast no
doubt on this passage: Crosley Ltd v North Broken Hill Holdings Ltd [1987] VR 119 (Vic S.Ct/FC), at 136.
Course of the Proceedings
The ASC sought interlocutory relief ex parte from Foster J. on 28 August 1995. On that date his Honour made orders, pending a further hearing, restraining National Nominees and EBC from disposing of or otherwise dealing with the Dome parcel and the Allegiance parcel. Those orders were subsequently continued, subject to a variation in the number of shares covered by the orders, until further order of the Court.
On 28 August 1995, Foster J. gave directions for service of the orders made by him. Paragraph 2 was as follows:
"This Order be served on EBC by delivery to Freehill, Hollingdale & Page, at Level 30, 19-29 Martin Place, Sydney by delivering the Order to Garry Charles Besson, a partner of that firm, personally or by leaving the Order at that address with a person whom the person leaving the orders believes on reasonable grounds to work at that address and to have attained the age of 16 years, by 12 noon Australian Eastern Standard Time on 29 August 1995 AND DIRECTS that the application and the supporting affidavit of Peter James Dumas sworn 28 August 1995 (including the Exhibit hereto) be similarly delivered."
One of the reasons this form of order was adopted was that his Honour was informed, correctly, that Freehill, Hollingdale and Page were acting for EBC in the Bank Leumi Case. In any event, sealed copies of the various documents specified in Foster J.'s orders were served in accordance with those orders on 29 August 1995.
When the proceedings were again before Foster J., on 30 August 1995, a solicitor for the firm informed Foster J. that the firm would not be forwarding the documents to EBC because "we do not wish to be involved in a breach of Swiss law". However, the solicitor also informed Foster J. that EBC was aware of the service of the documents. The reference to Swiss law was apparently to Article 271 of the Swiss Penal Code, paragraph 1 of which (in translation) reads as follows:
"1.Any person who, without authorization, carries out, on Swiss territory, actions which fall within the province or the public authorities, [and] any person who carries out such acts for a foreign State, individual, or organization, [and] any person who sanctions such acts, shall be punished by imprisonment or, in serious cases, reclusion."
The following exchange took place at the hearing of 30 August 1995 between his Honour and Mr Riordan, appearing for the ASC:
"HIS HONOUR: Well, what course do you wish to take?
MR RIORDAN: Your Honour, I would ask for a ruling in effect that service has been effected upon EBC by virtue of the satisfaction of the order for substituted service. I can show your Honour the opinion of Dr Noble to which Miss Chang refers if that would be of any assistance to the court.
HIS HONOUR: It is a matter we will have to go into but putting that aside for the moment that is an outstanding question, what else is being sought today?
MR RIORDAN: The ASC would seek a continuation of the restraining orders and secondly that the matter go over to 7 September at which stage we have the other proceedings on foot for directions and it seems appropriate as matters of fact are common the proceedings should proceed together. So the ASC simply seeks to have the status quo maintained until 7 September.
HIS HONOUR: We know that the proceedings have been brought to the attention of the first respondent.
MR RIORDAN: That is correct your Honour.
HIS HONOUR: The only outstanding problem is whether the forwarding of the documents which have been served upon Freehills is, I suppose, essential to the question of whether service has been effected. Apparently they know of the existence of the proceedings.
MR RIORDAN: Yes your Honour.
HIS HONOUR: Is it of any significance here today to obtain some order that service has been effected or is it sufficient of that matter as determined along with the other matters---
MR RIORDAN: Perhaps it should be determined with the other matters your Honour."
Communications with EBC
The evidence shows that the ASC has communicated directly with EBC by facsimile on a number of occasions and that EBC has responded by letter on one occasion. The communications were as follows:
lBy facsimile dated 28 August 1995, the ASC advised EBC of the orders made that day and provided copies of the orders, the ASC's application and the supporting
affidavit. This was done "for your information (and not by way of service)". The copy of the application sent by facsimile was not signed and sealed, as required by the Federal Court Rules in relation to a copy for service: Order 7, r.1(2).
lBy facsimile dated 29 August 1995, the ASC advised EBC of the service of court process on Freehill Hollingdale and Page and noted that a copy of the exhibit to the affidavit would be forwarded by courier.
lBy facsimile dated 30 August the ASC advised EBC that the restraining orders had been continued until 7 September 1995.
lBy facsimile dated 31 August, the ASC forwarded for information, and not by way of service, a sealed copy of the orders made on 30 August 1995.
lEBC returned the documents received by it under cover of a letter dated 31 August 1995. The letter was as follows:
"We cannot accept serving of papers which are not served through the appropriate diplomatic channels due to Article 271 of the Swiss Penal Code.
We herewith return these papers."
The papers returned included the original secondary notices.
lBy a facsimile dated 27 September 1995, the ASC advised EBC that the proceedings had been adjourned until 27 October 1995 at which time the ASC proposed to apply for final orders. The ASC invited EBC to enter an appearance and to ensure that all persons claiming an interest in the Dome and Allegiance parcels be made aware of the proceedings.
Jurisdiction
Mr Lindsay submitted that the Court could exercise jurisdiction under the Corporations Law in respect of the ASC's application against EBC, by reason of Order 8, r.1 of the Federal Court Rules. In particular he relied on Order 8, r.1(h) and (l):
"1.Subject to rule 2 and Divisions 2 and 3 of this Order, originating process may be served outside the Commonwealth in the following cases:
...
(h)where the subject matter of the proceeding, so far as concerns the person to be served is property in the Commonwealth;
...
(l)where the proceeding concerns the construction, effect or enforcement of an Act or a regulation or other instrument having or purporting to have effect under an Act."
Mr Lindsay contended that the requirements of rule 1(h) were satisfied because the subject matter of the proceedings consisted of the Dome and Allegiance parcels. These shares
were "property in the Commonwealth", since shares in a company are situated in the place where they are registered and can only be transferred: Brassard v Smith [1925] AC 371; P.E. Nygh, Conflict of Laws in Australia (6th ed, 1995), 488. Alternatively, Mr Lindsay contended that the proceedings concern the construction, effect or enforcement of the Corporations Law and the secondary notices having effect under that Law. I accept these submissions.
Service
It is necessary to determine whether EBC has been duly served with the initiating process. In this connection a number of rules other than Order 8, r.1 are relevant:
"ORDER 8
RULE 2 LEAVE OR CONFIRMATION
2(1)Service outside the Commonwealth of originating process is not valid under this Order unless-
(a)the service is in accordance with the prior leave of the Court given under sub-rule (2);
(b)the Court confirms the service under sub-rule (4); or
(c)the person served waives objection by entering an appearance.
2(2)Where the Court is satisfied of the following matters-
(a)that the proceeding is a proceeding in which the Court has jurisdiction;
(b)that the proceeding is a proceeding to which rule 1 applies; and
(c)that the applicant has a prima facie case for the relief which he seeks,
the Court may, by order, grant leave to serve originating process outside the Commonwealth under this Order.
2(3)The evidence on a motion for leave under sub-rule (2) shall include evidence showing in what country or place the person to be served is, or probably may be found, and whether that country is a convention country or a non-convention country.
2(4)Where originating process has been served outside the Commonwealth without a prior motion for leave under sub-rule (2), and the Court is satisfied-
(a)on the matters mentioned in sub-rule (2); and
(b)that the failure to apply for leave is sufficiently explained, the Court may by order confirm the service.
RULE 3 OTHER DOCUMENTS
3.Subject to any convention, service outside Australia of a document other than originating process is valid if the service is in accordance with the prior leave of the Court or is confirmed by the Court.
RULE 4 RULES AS TO SERVICE GENERALLY
4.Subject to this Order and subject to any convention, the Rules apply to service outside Australia under this Order as they apply to service inside Australia.
RULE 5MODE OF SERVICE
5.A document which is to be served outside Australia need not be served personally on the person required to be served so long as it is served on him in accordance with the law of the country in which service is effected."
Order 7, r.9 provides as follows:
RULE 9 SUBSTITUTED SERVICE
9(1)Where for any reason it is impractical to serve a document in the manner set out in the Rules, the Court may on an application made ex parte order that, instead of service, such steps be taken as are specified in the order for the purpose of bringing the document to the notice of the persons to be served.
9(2)Where the Court makes an order under sub-rule (1), the Court may order that the document be taken to have been served on the happening of any specified event, or on the expiry of any specified time.
The orders made by Foster J. on 28 August 1995 do not make it entirely clear whether his Honour was intending to make an order for substituted service on EBC pursuant to Order 7, r.9. For such an order to be made, the applicant must demonstrate that for some reason "it is impractical to serve a document in the manner set out in the Rules". Mr Lindsay informed me that evidence was tendered to his Honour which showed that service in Switzerland was "impractical" in the relevant sense. That evidence, so I was informed, included expert opinions as to the effect of art.271 of the Swiss Penal Code. This article is intended to protect Switzerland's sovereignty against acts of a foreign state or entity which are regarded as a matter of authority under Swiss law. It also appears from the exchange that took place in court on 30 August 1995 that his Honour viewed the order previously made by him as one for substituted service. In these circumstances, although the orders do not specifically invoke Order 7, r.9, I think they should be read as orders made under that rule, and were intended to bring the documents to the attention of the EBC.
Mr Lindsay accepted that Foster J. was not asked to and did not grant leave to serve the originating process outside Australia, pursuant to Order 8, r.2(2). Although there was material before his Honour that would, or might have been, sufficient to satisfy the conditions specified in that sub-rule, no leave was sought. I accept that this occurred because of the urgency of the application on 28 August 1995 and because it was thought likely, having regard to the course of other proceedings in which EBC had appeared, that invoking Order 7, r.9 would secure the attendance of EBC before the Court.
On the material before me, I am satisfied of the matters specified in Order 8, r.2(2). I am also satisfied that the initiating process and supporting material has come to the attention of EBC. While Freehill Hollingdale & Page did not forward the documents served on them to EBC, copies of those documents were sent by facsimile to EBC by the ASC.
In my view it is appropriate to make an order under Order 7, r.9(2) that the documents delivered to Freehill Hollingdale & Page should be taken to have been served on EBC at the time they were delivered to Freehill Hollingdale & Page. I also think it is appropriate to make an order confirming service outside the Commonwealth on EBC, pursuant to Order 8, r.2(4). In this connection I am satisfied of the matters mentioned in O.8, r.2(2) and I am also satisfied that the failure to apply for leave is sufficiently explained. In my opinion, although an order for substituted service on Australian solicitors was made by Foster J., this is a case where "originating process has been served outside the Commonwealth" within the meaning of Order 8, r.2(4). The purpose of the order for substituted service was to bring the documents to the attention of EBC in Switzerland. While the documents themselves were not forwarded by Freehill, Hollingdale & Page, EBC was told of them and received copies directly from the ASC.
Mr Lindsay invited me, if it were necessary to do so, to make an order under Order 1, r.8 dispensing with compliance with the Rules, insofar as they require
originating process to be served personally on EBC (Order 8, r.1(1)); and
the copy for service to be signed and sealed (Order 8, r.1(2)).
Unsealed copies of the application and supporting affidavit were sent by facsimile to EBC on 28 August 1995. I infer from the correspondence that these documents were received by EBC at about the time they were transmitted from Australia. While the ASC expressly stated that the documents were being forwarded for information only (to avoid possible difficulties with art.271), they alerted EBC to the proceedings and gave it the opportunity to participate if it wished to do so. The evidence shows that EBC had engaged local solicitors for the purposes of other proceedings and (as I would infer) could have chosen to instruct them to appear on its behalf in these proceedings. There is no evidence in these proceedings that instructing Australian solicitors would have exposed EBC to liability under Swiss law. In these circumstances, if it were necessary to make an order under Order 1, r.8, in the terms suggested by Mr Lindsay, I would do so. However, in view of the conclusions I have already reached, I do not think it is necessary to make such an order.
Secondary Notices
The evidence satisfies me of the following:
On 11 August 1995, the ASC served by facsimile a primary notice on National Nominees under s.718 of the Corporations Law, in relation to its holding of 8,646,700 shares in Dome. The notice required a statement of its relevant interest in the company.
On 11 August 1995, the ASC served by facsimile a primary notice on National Nominees, also under s.718 of the Corporations Law, in relation to its holding of 3,680,000 shares in Allegiance.
On 11 August 1995, National Nominees replied to the primary notices, stating that it held 6,611,000 shares in Dome and 3,680,000 shares in Allegiance on behalf of EBC.
On 18 August 1995, the ASC issued a secondary notice, under s.719 of the Corporations Law, to EBC, in relation to the Dome parcel. This notice was served on EBC in Switzerland by facsimile on 18 August 1995 and also by courier on 21 August 1995.
On 18 August 1995, the ASC issued a secondary notice, under s.719 of the Corporations Law, in relation to the Allegiance parcel. This notice was also served on EBC in Switzerland by facsimile on 18 August 1995 and by courier on 21 August 1995.
EBC has not responded to either notice, except that (as previously noted) it returned them on 31 August 1995. It is therefore in breach of its obligations under s.722 of the Corporations Law. The information sought by the secondary notices does not appear on the register of Dome or Allegiance: see Corporations Law, s.727(c).
Substantial Shareholder Notices
The evidence satisfied me of the following:
On 30 June 1995, EBC was beneficially entitled to 5.28% of the total issued capital of Dome and 6.4% of the total issued capital of Allegiance. There had been some change in the shareholding in Allegiance by August 1995.
EBC has not lodged substantial shareholder notices, as required by the Corporations Law, ss.709-711.
Relief sought
The ASC seeks orders to the following effect:
that EBC comply with the secondary notices served upon it in relation to the Dome parcel and the Allegiance parcel;
that EBC comply with its obligations under s.709(3) of the Corporations Law to give substantial shareholders notice in respect of the Dome parcel and the Allegiance parcel;
that if EBC fails to comply with the orders, the shares should vest in the ASC until sold by it;
that the ASC sell the shares in such manner and on such terms as it thinks fit and that it be at liberty to decline to make payments out of the proceeds of sale to any person claiming to be entitled thereto until that person provides appropriate information sought in the secondary notices.
Mr Lindsay acknowledged that an order under s.613 of the Corporations Law, vesting the shares in the ASC is a stringent
measure. However, he argued that it was an appropriate measure in the circumstances of the present case since such an order (which would apply only in the event of EBC continuing not to comply with its statutory obligations) would serve to provide a fully informed market. Moreover, whatever perceived difficulties may have arisen in relation to s.271 of the Swiss Penal Code, EBC has been served with the secondary notices, and has failed to comply with them. No explanation for the non-compliance, either in relation to the secondary notices or the substantial shareholding provisions has been forthcoming in these proceedings. The shareholdings in both companies are by no means trivial, since each has exceeded the substantial shareholding threshold (although the shareholding in Allegiance has since been reduced).
Care must be taken in relation to a drastic remedy such as a vesting order. However, in the circumstances of the present case, if EBC persists in its failure to comply with the statutory requirements, it seems to me that a vesting order serves the objects of the legislation: see Brunswick NL v Blossomtree Pty Ltd (1992) 7 WAR 226 (S.Ct. WA/FC), at 234-235. Similarly, I think it is appropriate that the orders provide for the sale of the shares, with the proceeds to be held by the ASC in accordance with the unclaimed property regime in Part 9.7 of the Corporations Law.
I think that the orders should include provision for notification to EBC of their terms. Mr Lindsay accepted that this is appropriate. Dome sought a direction that it be given prior notification of any sale of the Dome parcel by the ASC. I propose to accede to this request.
I also think it appropriate, as Mr Lindsay suggested, that liberty be reserved to apply for relief against the orders during a period of two months from the date they are made. The power of the ASC to sell the shares should be exercisable only after the expiration of the two month period.
In the absence of evidence relating to Swiss law, I think it appropriate to make orders directing compliance with the secondary notices and with the requirements of s.709(3) of the Corporations Law.
Costs
The ASC, Dome and National Nominees each sought orders that their costs be paid by EBC and that, if unpaid, they be met from the proceeds of sale of the shares by the ASC. In my view, there is power to make such orders under ss.742(2) and 744(6) of the Corporations Law and s.43 of the Federal Court of Australia Act 1976 and I propose to exercise the power.
Orders
I make the following orders:
ORDER that, subject to paragraph 5 of these orders, EBC Zurich AG ("EBC") comply, within 7 days of the date of these orders, with the two Secondary Notices dated 18 August 1995, which relate to the parcel of 6,611,000 ordinary 20 cent fully paid shares in the issued capital of Dome Resources NL ("Dome") held by National Nominees Limited ("National") on behalf of EBC ("the Dome Parcel")
ORDER that, subject to paragraph 6 of these orders, EBC comply, within 7 days of the date of these orders, with the Secondary Notices dated 18 August 1995, which relate to the parcel of 2,680,000 ordinary 20 cent fully paid shares in the issued capital of Allegiance Mining NL ("Allegiance") held by National on behalf of EBC ("the Allegiance Parcel").
ORDER that, subject to paragraph 5 of these orders, EBC give to Dome within 7 days of the date of these orders, a written notice which complies with section 709(3) of the Corporations Law.
ORDER that, subject to paragraph 6 of these orders, EBC give to Dome, within 7 days of the date of the orders herein, a written notice which complies with section 709(3) of the Corporations Law.
ORDER that, upon the expiration of 7 days from the date of these orders, if EBC has failed to comply with paragraphs 1 and 3 of these orders, then the Dome Parcel
shall vest in the Australian Securities Commission ("ASC") until sold by it pursuant to these orders.
ORDER that, upon the expiration of 7 days from the date of these orders, if EBC has failed to comply with paragraphs 2 and 4 of these orders, then the Allegiance Parcel shall vest in the ASC until sold by it pursuant to these orders.
ORDER that, upon the expiration of two months from the date of these orders, the ASC shall, subject to the succeeding paragraphs of these orders, proceed to sell any shares vested in it by virtue of these orders ("the Relevant Shares") in such manner and on such terms as it thinks fit.
DIRECT that, before any sale of the Dome Parcel, the ASC give to Dome 14 days' prior notice of the number of shares to be sold, the proposed manner of sale and the price at which it is proposed to offer the shares for sale.
GRANT liberty to Dome to apply on 24 hours notice with respect to the ASC's proposals for sale of the Dome Parcel.
10.ORDER that, subject to paragraph 11 of these orders, any proceeds of the sale of the Relevant Shares be applied to the payment of the ASC's costs (to the extent that they remain unpaid), including any investigation costs incurred under section 91 of the ASC Law and any costs of and incidental to the sale of the Relevant Shares, and then to the costs of Dome and the costs of National (to the extent that they remain unpaid). The balance of the proceeds should be dealt with in accordance with s.577 and Part 9.7 of the Corporations Law.
11.ORDER that, subject to any further order of the Court, the ASC is at liberty to decline to make any payments out of the proceeds of sale of the Relevant Shares to any person claiming entitlement to the whole or a part of the proceeds unless that person provides the information requested by the relevant Secondary Notice referred to in paragraphs 1 and 2 hereof, information regarding the basis of that person's entitlement to the proceeds and an explanation of that person's failure to provide the information earlier.
12.GRANT LIBERTY to any person, including the Respondents, to apply for relief against these orders during a period of two calendar months from the date of the order herein.
13.ORDER that EBC pay the costs of the ASC, Dome and National of these proceedings.
14.DIRECT, pursuant to Federal Court Rules, Order 7, r.9(2), that the application and supporting affidavit delivered to Freehill Hollingdale & Page should be taken to have been served on EBC on 29 August 1995.
15.CONFIRM, pursuant to Federal Court Rules, Order 8, r.2(4), service of these proceedings on EBC outside Australia.
16.DIRECT that the ASC notify EBC of the terms of these orders by facsimile directed to the address referred to in the letter dated 31 August 1995 from EBC to the ASC, within three days of the date of these orders.
I certify that this and the preceding 22 pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville.
Associate:
Dated:14 December, 1995
Heard:27 October and 3 November, 1995
Place: Sydney
Decision:14 December, 1995
Appearances: Mr G.C. Lindsay SC, instructed by Mr Peter Stepek, Solicitor for Australian Securities Commission, appeared for the applicant.
Ms Dunford, of Mallesons Stephen Jaques, Solicitors, appeared for the second respondent.
Mr L. Powers of Minter Ellison, Solicitors, appeared for the third respondent.
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