Australian Securities Commission v Lee, L
[1995] FCA 505
•19 JULY 1995
CATCHWORDS
COSTS - recovery of costs - application dismissed by consent during course of hearing - no completed hearing as to merits - with limited possible exception evidence upon which parties placed reliance before court - respondent not exhausted right to address court - factors relevant to determination.
ASC Law ss 21(3), 38, 70 and 127A
Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194
No. SG 3163 of 1994
AUSTRALIAN SECURITIES COMMISSION v LAWRENCE LEE
Branson J
Adelaide
19 July 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No. SG 3163 of 1994
)
GENERAL DIVISION )
BETWEEN:
AUSTRALIAN SECURITIES COMMISSION
Applicant
- and -
LAWRENCE LEE
Respondent
MINUTES OF ORDER
CORAM: Branson J
PLACE: Adelaide
DATE: 19 July 1995
THE COURT ORDERS THAT:
The applicant's costs of the proceedings, including reserved costs, are to be taxed and 50% of the sum so fixed is to be paid by the respondent.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No. SG 3163 of 1994
)
GENERAL DIVISION )
BETWEEN:
AUSTRALIAN SECURITIES COMMISSION
Applicant
- and -
LAWRENCE LEE
Respondent
REASONS FOR DECISION
CORAM: Branson J
PLACE: Adelaide
DATE: 19 July 1995
In this matter the Australian Securities Commission ("the Commission") being satisfied that the respondent had, without reasonable excuse, failed to comply with requirements under Part 3 of the ASC Law (other than Division 8) applied to the Court for it to inquire into the case and for an order directing the respondent to comply forthwith with such requirements (see ASC Law s70).
The affidavit of Stuart Malcolm Aldous ("Mr Aldous") filed in support of the application exhibited two certificates of the Commission issued in reliance on s70(2) of the ASC Law. Section 70(2) empowers the Commission to certify in writing the failure to comply with a requirement under Pt3 of the ASC Law (other than Div8). The first certificate referred to a failure by the respondent to comply with a requirement made pursuant to s38 of the ASC Law on 9 December 1994. The second certificate referred to a failure by the respondent to comply with a requirement of an inspector made pursuant to s21(3) of the ASC Law on 15 December 1994.
Each of the requirements with which the respondent, as he admits, failed to comply was calculated to elicit from him information as to the whereabouts of certain books and records of the Zhen Yun Group of Companies. The respondent is a former director of Zhen Yun (Australia) Pty Ltd.
I commenced to hear this matter on 3 April 1995. The respondent appeared in person. On that day affidavit evidence was placed before me by each party. The respondent cross-examined the two officers of the Commission whose affidavits were received into evidence. Counsel for the Commission then addressed me and the respondent commenced to do so. During the course of the respondent's address a possible application for leave to place further affidavit evidence before the Court was foreshadowed. Ultimately this issue was not dealt with. Following an exchange between the respondent and me during his address, the respondent disclosed the information sought by the Commission. The inquiry was then adjourned for a few days during which the Commission was able to establish the accuracy of the information provided by the respondent. Upon the matter again being called on, the application was dismissed by
consent. Both the Commission and Mr Lee respectively then sought orders that their costs of the inquiry be paid by the other party. As to the respondent, who was not represented by a legal practitioner at any time, any costs recoverable by him should an order be made in his favour would be modest. I reserved my decision on the question of costs. I now give my decision on the costs applications and my reasons therefore.
The respondent raised five matters in justification of his earlier refusal to provide to the Commission the information sought by it. The first was that disclosure of the information sought would put him in breach of his employment contract with the Zhen Yun Group. He complained that the Commission's officers did not respond to his request that they identify the provision of the ASC Law which required him to answer questions in circumstances where to do so would place him in breach of a contractual provision as to confidentiality.
Secondly, the respondent raised concerns that the information sought from him by the Commission was information of the People's Republic of China and, should it become known that he had disclosed the information, it may become unsafe for him to travel to China. He gave reasons for doubting that the confidentiality of information provided by him would be maintained. He queried why such information should be sought from him, a former director of Zhen Yun (Australia) Pty Ltd, rather than from a continuing director of the company whom the Commission conceded that it had questioned.
Thirdly, the respondent challenged the legality of the Commission's investigation on the basis that certain officers of the Commission may have been using delegated authorities for their personal benefit. It is appropriate for me to record that I am satisfied that this apprehension of the respondent is without foundation.
Fourthly, the respondent alleged that one of the officers of the Commission central to the investigation had a conflict of interest in respect of the Commission's investigation. As is admitted on behalf of the Commission, the officer in question is the husband of a partner in a firm of solicitors which, at the time of the investigation, was acting for opponents of the Zhen Yun Group in two separate Supreme Court proceedings. This would not alone cause the officer to have any conflict of interest. Mr Lee's concern was that the officer himself had a financial interest in providing information potentially adverse to the Zhen Yun Group to his wife. This concern was apparently based on a belief that the firm of solicitors would financially benefit from the receipt of information provided by the officer of the Commission, that as a consequence all partners of the firm would financially benefit, and that as a further consequence, the officer of the Commission would benefit via his wife. It is sufficient to say that no proper foundation for the respondent's belief (or any of its constituent parts) was established before me. Further, all officers of the Commission are under a statutory obligation not to disclose information obtained during the course of their duties (ASC Law s127A). Mr Lee has alleged breaches of such obligation by the officer concerned. The accuracy of such allegations has not been explored before me. The respondent is aware of the proper avenues of complaint in respect of conduct of officers of the Commission.
Fifthly, the respondent suspects that one or more officers of the Commission has or have conspired with others to place pressure on the directors of the Zhen Yun Group for the purpose of benefiting the parties opposed to the Zhen Yun Group in the Supreme Court proceedings referred to above. I am satisfied that this suspicion is without foundation.
The authorities suggest that, as a general rule, where parties to a proceeding no longer wish to continue, the Court should facilitate the conclusion of the proceedings by making a costs order at that stage if this is requested. However where there has been, at that stage, no trial on the merits it will rarely be appropriate for the Court to endeavour to determine for itself the case on the merits in order to determine how the costs of the proceedings should be borne (Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 and the authorities there cited).
This case is to an extent distinguishable from Australian Securities Commission v Aust-Home Investments Limited and the
authorities there cited in that, subject to the foreshadowing of a possible application for leave to place additional evidence before the Court, all evidence upon which the parties placed reliance was before the Court before the termination of the proceedings. Moreover, I had the benefit of the address on behalf of the Commission and had heard the address of the respondent in part.
Nonetheless the respondent did not exhaust his right to address the Court. It is now uncertain whether or not he may have sought leave to place further evidence before the Court. If he had sought and obtained such leave it is uncertain what relevance and weight the additional evidence might have had.
It is not, in my view, desirable that I now make rulings on points of law which are moot between the parties. Nor is it desirable that I seek to determine how I would probably have exercised the discretion given to the Court by s70(3) of the ASC Law had I decided that the respondent had no reasonable excuse for his failure to comply with the Commission's requirements, and had I heard and considered such additional evidence as the respondent may have obtained leave to place before the Court and the submissions of the respondent in full.
Nothing before me, in my view, suggests that it was unreasonable of the Commission to commence these proceedings. In fairness to the respondent, however, I should record that I do have a lingering suspicion that a more sympathetic approach by the Commission to the respondent and his expressed concerns might have avoided the need for the proceedings. As to the respondent, I am satisfied, as is set out above, that he entertains unwarranted suspicions concerning certain officers of the Commission. Such suspicions have been major motivating factors in his refusal to comply with the Commission's requirements. However, even though he eventually disclosed the information sought, I cannot be satisfied that it was unreasonable of him to defend the proceedings. In view of his ultimate willingness to disclose to the Commission the information which it sought from him it may well be that it would have been reasonable for him to make such disclosure earlier in the life of the proceedings.
On balance, I consider that justice in this case will be done by an order for costs in favour of the applicant, but an order limited to 50% of the costs of the applicant.
I certify that this and the preceding pages are a true copy of the Reasons for Decision of Justice Branson.
Associate:
Dated:
Counsel and Solicitor : Ms C Francas
for the Applicant
Respondent appeared
in person
Hearing Dates : 3 and 5 April 1995
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