Australian Securities Commission v Rohani, Rohyeh

[1998] FCA 1196

FEDERAL COURT OF AUSTRALIA

Corporations – whether the ASC has standing to seek the winding up of the third respondent – whether it is an essential condition of the conduct of an investigation under s 13(1) of the Australian Securities Commission Act 1989 that it be established by the ASC that the decision to investigate had been made and was evidenced in some appropriate formal manner.

Corporations Law – ss 461(k), 462(2), 464(1)

Australian Securities Commission Act 1989 – s 13

Little River Goldfields NL v Moulds (1991) 32 FCR 456 – foll.
Boys v ASC (1997) 24 ACSR 1 – foll.

AUSTRALIAN SECURITIES COMMISSION V ROHYEH ROHANI, HAMISH BAKER REAL ESTATE PTY LIMITED AND GLOBAL FINANCE CORPORATION PTY LIMITED

NG 3098 OF 1998

JUDGE:        BEAUMONT J.
PLACE:        SYDNEY
DATE:          3 SEPTEMBER 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 3098 of 1998

BETWEEN:

AUSTRALIAN SECURITIES COMMISSION
APPLICANT

AND:

ROHYEH ROHANI
FIRST RESPONDENT

HAMISH BAKER REAL ESTATE PTY LIMITED
SECOND RESPONDENT

GLOBAL FINANCE CORPORATION PTY LIMITED
THIRD RESPONDENT

JUDGE:

BEAUMONT J.

DATE OF ORDER:

3 SEPTEMBER 1998

WHERE MADE:

SYDNEY

RULING:

1. The applicant has standing to commence these proceedings.

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	NG 3098 of 1998

BETWEEN:

AUSTRALIAN SECURITIES COMMISSION
APPLICANT

AND:

ROHYEH ROHANI
FIRST RESPONDENT

HAMISH BAKER REAL ESTATE PTY LIMITED
SECOND RESPONDENT

GLOBAL FINANCE CORPORATION PTY LIMITED
THIRD RESPONDENT

JUDGE:	BEAUMONT J.
DATE:	3 SEPTEMBER 1998
PLACE:	SYDNEY

REASONS FOR RULING

BEAUMONT J.

In these proceedings a preliminary question has arisen as to the standing of the Australian Securities Commission (“the Commission”) to claim the relief sought in its amended application filed in Court on 5 June 1998 and, in particular, order 4 there sought. That is, that the third respondent be wound up pursuant to s 461(k) of the Corporations Law (“the Law”). By s 461(k) it is provided that:

“The Court may order the winding up of a company if:

…

(k)the Court is of opinion that it is just and equitable that the company be wound up.”

By s 462(2) of the Law it is provided that:

“(2)… any one or more of the following may apply for an order to wind up a company:

…

(e)       the Commission pursuant to  section 464…”

By s 464(1) of the Law it is provided as follows:

“(1)Where the Commission is investigating, or has investigated, under Division 1 of Part 3 of the ASC Law:

(a)       matters being, or connected with, affairs of a company;  or

(b)       matters including such matters;

the Commission may apply to the Court for the winding up of the company.”

By s 13(1) of the Australian Securities Commission Act 1989 (“the Act”) it is provided:

“13(1)The Commission may make such investigation as it thinks expedient for the due administration of a national scheme law of this jurisdiction where it has reason to suspect that there may have been committed:

(a)       a contravention of a national scheme law;  or

(b)a contravention of a law of the Commonwealth or of a State or Territory, being a contravention that:

(i)concerns the management or affairs of a body corporate;  or

(ii)involves fraud or dishonesty and relates to a body corporate, securities or futures contracts.”

Although it is acknowledged, on behalf of the first and third respondents, that a formal investigation is being conducted into the affairs of a company related to the third respondent, it is submitted that in a sense, which I will explain, this is not of itself sufficient to satisfy the requirements of s 464(1) of the Law. By way of background, it should be explained that there is evidence, and indeed unchallenged evidence, before the Court that the first respondent was the controller of Empire Systems Pty Limited, the company which is the subject of a formal investigation by the Commission, and she is also the controller of the third respondent. There are other associations between Empire Systems Pty Limited and the third respondent disclosed in the evidence, to which I need not refer.

The investigation into the activities of Empire Systems Pty Limited concerns a number of matters which need not be detailed for present purposes.  It is sufficient for me to say that one, at least, of the matters being investigated in that connection concerns inter-company transactions between Empire Systems Pty Limited and the third respondent, in respect of which the evidence before the Court discloses that both the first respondent and her husband actively participated. 

In those circumstances the objection to standing could, I think, only have any prospect of success if it could be shown that it was an essential condition of the conduct of an investigation under s 13(1) of the Act that it be established by the Commission that the decision to investigate had been made and was evidenced in some appropriate formal manner.
It is common ground that there is no evidence of any such formal determination, although there is a suggestion in the evidence that an informal decision to investigate the affairs of the third respondent has been made.  However, in my opinion, it is not necessary that there be any formal decision or any formal record of any decision to investigate for present purposes. 

This was the view of Davies J in Little River Goldfields NL v Moulds (1991) 32 FCR 456 at 462-464. In Boys v ASC (1997) 24 ACSR 1 (at 8) Carr J agreed with Davies J on the point. I would add my own respectful concurrence. There is nothing in the language of s 13(1) to import such a requirement. On the contrary, the language of that provision and its evident purpose clearly indicate that a degree of informality is contemplated. Section 13(1) speaks in terms of the Commission making such investigation “as it thinks expedient” in that connection.

When one turns to the language of 464(1) of the Law, the conclusion I have reached is reinforced. It is there provided, it will be recalled, that standing to apply will exist, inter alia, “where the Commission is investigating or has investigated” the relevant matters. That is to say, the operation of s 464(1) is not made to depend upon the existence of a formal decision to investigate; rather the section invites a broader factual inquiry into the question whether or not the Commission “is investigating or has investigated” the relevant matter.

In my opinion, the standing of the Commission in the present case has been demonstrated either by viewing the activities of the Commission as an investigation of the affairs of the third respondent, or as the investigation of “matters connected with the affairs of the third respondent” by virtue of the investigation being conducted into the affairs of Empire Systems Pty Limited in the particular context I have mentioned.

For those reasons I rule that the Commission has standing to commence these proceedings.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont

Acting Associate:

Dated:            3 September 1998

Counsel for the Applicant:	Ms L Muston
Solicitor for the Applicant:	Rose Webb
Counsel for the First and Third Respondent:	Mr J Johnson
Solicitor for the First and Third Respondent:	Nash O'Neill Tomko
Date of Hearing:	8 July 1998 and 3 September 1998
Date of Judgment:	3 September 1998