Australian Securities Commission v Stephen Su No. SCGRG 94/188 Judgment No. 5061 Number of Pages 8 Statutes Interpretation - [1995] SASC 5061

COURT IN THE IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING(2) CJ, MOHR(3) AND OLSSON(1) JJ

CWDS
Statutes - interpretation - appeal - question of interpretation of section 1064(1) of the Corporations Law and Regulation 7.12.04 of the Corporations Regulations - section 1064 creates offence - exemption also created - exception to exemption for "person whose ordinary business is ... promotion of similar schemes" - creation of 3 separate trusts were steps incident of a single scheme - "ordinary business" does not include a single scheme - appeal dismissed. Corporations Laws 1064 and Corporations Regulations r7.12.04. Melbank Corporation v Doggett (1990) 8 ACLC 585, considered.

HRNG ADELAIDE, 29 November 1994 #DATE 13:4:1995 #ADD 26:6:1995

Counsel for appellant: Mr W J N Wells QC with
Mr S Vorreiter

Solicitors for appellant: DPP (Cwlth)

Counsel for respondent: Mr S Apps

Solicitors for respondent: Peter Kerin and Associates

ORDER
Appeal dismissed.

JUDGE1 OLSSON J This appeal raises what is, in reality, a question of discrete statutory interpretation arising in relation to the application of section 1064(1) of the Corporations Law ("the Law") and Regulation 7.12.04 of the Corporations Regulations ("the Regulations"). It derives from an information presented by the appellant against the respondent alleging eleven counts of breaches of that section.

2. The relevant narrative facts are of some complexity, but the legal issue is a simple one.

3. I first direct attention to the factual background.

4. In about mid 1991 the respondent and his co-accused Gary Wilson (who are professional accountants practising in South Australia) were introduced by a man called John Hanson to one James Allman (who was resident in Queensland).

5. Allman was the inventor of a machine capable of manufacturing an edible cup made of potato flour. This has consistently been referred to as a "potato cup", the use of which was contemplated in the selling of hot foods such as french fries and the like. The concept involved was that the potato cup would, in particular, replace items such as throw away chip containers. Because it was consumable or, at the very least, biodegradable, its use would have positive environmental effects.

6. As a consequence of the introduction, negotiations were entered into between the parties concerning a possible purchase of the right to manufacture and distribute potato cups, inter alia, in South Australia. These extended to the purchase of machines by means of which to manufacture the cups. Definitive discussions were eventually held by all parties concerned in Queensland on 14/15 July 1991.

7. The outcome of the discussions was summarised by the prosecutor in these terms:-
    "The negotiations which eventually were formalised in
    agreements contemplated that the machines would be
    manufactured in Queensland by a company associated with
    Allman called The Potato Cup Company Pty Limited. Another
    company associated with Allman Potato Cup Marketing Pty
    Limited was to license a company associated with Wilson and
    Su, namely Potato cup Australia Pty Limited as the exclusive
    licensee for the manufacture and…

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

AGLC: Australian Securities Commission v Stephen Su No. SCGRG 94/188 Judgment No. 5061 Number of Pages 8 Statutes Interpretation [1995] SASC 5061
Case: [1995] SASC 5061
Decision Date: 13 April 1995

CaseChat Overview and Summary

In the Full Court of the Supreme Court of South Australia, the Australian Securities Commission (ASC) brought an appeal against Stephen Su, challenging the dismissal of charges under section 1064(1) of the Corporations Law and Regulation 7.12.04 of the Corporations Regulations. The ASC alleged that Su, along with his co-accused Gary Wilson, had breached the law by promoting investment opportunities in a scheme to manufacture and distribute potato cups, structured through multiple unit trusts. The central legal issue was whether the creation of three separate trusts represented three similar schemes, exempt from the prohibitions under the law, or whether they constituted a single scheme, making the exemption inapplicable.

The trial magistrate and the single judge of the Supreme Court had both dismissed the charges, concluding that the three trusts represented a single scheme rather than multiple similar schemes. They reasoned that the ordinary business of the promoter, Potato Cup (SA) Pty Ltd, was not the promotion of similar schemes, as it was focused on a single business scheme involving the manufacture and distribution of potato cups.

On appeal, the ASC argued that the three trusts constituted three similar schemes, and that the exemption in the regulations should not apply. However, the Full Court found that the lower courts' interpretation of the term "scheme" was correct. They held that the creation of three trusts was an incident of a single scheme, and that the ordinary business of the promoter did not include the promotion of similar schemes. The Full Court dismissed the appeal, affirming the decisions of the lower courts.

The final order of the Full Court was to dismiss the appeal, upholding the decisions of the trial magistrate and the single judge.

Orders