Australian Securities Commission v White, Errol John
[1998] FCA 790
•24 JUNE 1998
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QG 40 of 1998
BETWEEN:
AUSTRALIAN SECURITIES COMMISSION
APPLICANTAND:
ERROL JOHN WHITE
RESPONDENTJUDGE:
SPENDER J
DATE OF ORDER:
24 JUNE 1998
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
Errol John White comply with the requirements of a notice given to him under s 19 of the Australian Securities Commission Act 1989, which notice is dated 14 April 1998 and which was personally served upon him on 15 April 1998.
THE COURT DIRECTS THAT:
Errol John White comply with that notice by appearing at 9.30 am on Wednesday, 1 July 1998 at level 22, 240 Queen Street, Brisbane, for examination on oath or affirmation and by answering questions put to him.
THE COURT ORDERS THAT:
Pursuant to s 70(3) Australian Securities Commission Act 1989, Errol John White comply with the requirements of a notice given to him under s 30 of that Act, which notice is dated 21 May 1998, and which was personally served upon him on 23 May 1998.
THE COURT DIRECTS THAT:
Errol John White comply with that notice by producing to Niall Coburn at 9.30 am on Wednesday, 1 July 1998, the documents referred to at paras 1, 2, 3 and 4 of that notice.
THE COURT FURTHER ORDERS THAT:
Errol John White be restrained from damaging, defacing, destroying or interfering with in any way howsoever the documents the subject of a notice under s 30 of the Australian Securities Commission Act 1989 dated 21 May 1998 and served upon him on 23 May 1998.
Errol John White pay the applicant’s costs of and incidental to the application to be taxed if not agreed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QG 40 of 1998
BETWEEN:
AUSTRALIAN SECURITIES COMMISSION
APPLICANTAND:
ERROL JOHN WHITE
RESPONDENT
JUDGE:
SPENDER J
DATE:
24 JUNE 1998
PLACE:
BRISBANE
REASONS FOR JUDGMENT
This is an amended application before the court, the amendment having been the subject of leave granted today with no opposition from Mr Errol John White, who is the respondent to the present application. The application claimed the holding of an inquiry pursuant to s 70(3) of the Australian Securities Commission Act 1989 (‘the ASC Act’) into a failure by Mr White to comply with the requirements of notices issued to the respondent pursuant to ss 19 and 30 of the ASC Act. It also seeks an order pursuant to s 70(3) of the ASC Act that Mr White comply with the requirements of two of the notices given to him, and that the court order him to comply with the ss 19 and 30 notices on a day and time to be fixed by the court. It also sought an injunction restraining Mr White from damaging, defacing, destroying, or interfering in any way whatsoever, with documents the subject of a notice relevantly being the notice which was served on him on 23 May 1998 pursuant to s 30 of the ASC Act. It also sought that the respondent pay the costs of the application.
A notice in Form 1 complying with the requirements of the Act and regulations and, in particular reg 4, was issued on 14 April 1998. The material terms of that notice are as follows:
“In relation to an investigation into suspected contraventions of sections 1064 and 995 of the Corporations Law by Coastal Asset Management Corporation and Leonard Smith in connection with the making available of a right to participate in a business scheme to be carried on by that company, you are hereby notified that, under subsection 19(2) of the ASC Law, you are required:
(a)to appear at 9.30 am on Friday, 17 April 1998 at Level 22, 240 Queen Street, Brisbane before Sean Riordan and Niall Coburn for examination on oath or affirmation and to answer questions put to you in relation to the investigation; and
(b)to give the Australian Securities Commission all reasonable assistance in connection with the investigation.”
The relevant s 30 notice is in Form 2 and complies with requirements of the notice under s 30 of the ASC Act. The notice is dated 21 May 1998, and I incorporate the terms of it in these reasons. It commences:
“In relation to an investigation into Leonard John Smith, Len J Smith Pty Ltd ACN 002 730 752, Coastal Financial Services ACN 003 362 141, Coastal Financial Group and Coastal Asset Management Corporation IBC No 2449/97 in relation to possible breaches of s 1064 and 995 of the Corporations Law occurring in connection with the making available or the right to participate in a bank debenture trading program in the period from 1 November, 1997 to date:
you are notified that, under section 30 of the ASC Law, you are required to produce to Niall Coburn at 9.00 am on 26 May 1998 at level 22, 240 Queen Street, Brisbane the following books:
1.All notes, correspondence (whether or not with clients), client files relating to dealings, investments or loan agreements with Leonard John Smith, Len J Smith Pty Ltd ACN 002 730 752, Coastal Financial Services ACN 003 362 141, Coastal Financial Group, Coastal Asset Management Corporation IBC No 2449/97, Investors International or any bank trading program or investment program howsoever described.
2.All listings of investors kept in relation to, Leonard John Smith, Len J Smith Pty Ltd ACN 002 730 752, Coastal Financial Services ACN 003 362 141, Coastal Financial Group, Coastal Asset Management Corporation IBC No 2449/97, Investors International or any bank trading program or investment program howsoever described.
3.All bank statements for accounts kept in relation to Leonard John Smith, Len J Smith Pty Ltd ACN 002 730 752, Coastal Financial Services ACN 003 362 141, Coastal Financial Group, Coastal Asset Management Corporation 1BC No 2449/97, Investors International or any bank trading programs or investment program howsoever described.”
4.Notes, invoices, files relating to commissions, salary or fees paid to you or your wife, Catherine Bell, in relation to any work you have performed on behalf of, or in connection with, Leonard John Smith, Len J Smith Pty Ltd ACN 002 730 752, Coastal Financial Services ACN 003 362 141, Coastal Financial Group, Coastal Asset Management corporation IBC No 2449/97, Investors International or any bank trading programs or investment program howsoever described.”
There is in evidence proof of service of those notices and proof of non-compliance with the terms of each of those notices, and there is a certificate of non-compliance pursuant to s 70(2) of the Australian Securities Commission Act 1989 in respect of non-compliance with each of those two notices.
I am satisfied that there has been a failure by Mr White to comply with the notice issued under s 19 and the notice under s 30 of the Act. The material establishes the following:
An investigation by officers of the Australian Securities Commission was commenced on 9 March 1998 into suspected contraventions of the Corporations Law by or involving entities associated with the fundraising scheme carried on the in the name of "Coastal Asset Management Corporation".
The evidence establishes that funds of the order of $3.5 million were invested, and, of that sum, approximately $2.6 million is frozen, pursuant to orders made by the Federal Court in other proceedings, being proceedings numbered QG 23 of 1998. The investigation is presently directed at the deficiency of $887,000 in the funds raised. Mr Coburn deposes to a belief that this sum may be in England under the control of a person named Len Smith, and there is a letter from a solicitor for Mr Smith, hinting that that belief is sound.
The scheme contemplated a return of 525 per cent on the investment within a year. It is immediately apparent from that circumstance that the scheme bears the badge of criminality and fraud. The material deposes to a belief reasonably entertained that Mr White can give information relevant to the matter, the subject of the ASC investigation, concerning in particular, the location of the funds which are said to be deficient, and with the identity and protection of those funds.
The s 19 notice dated 14 April 1998, was personally served on Mr White on 15 April 1998, and the s 30 notice dated 21 May 1998 was personally served on Mr White on 23 May 1998, requesting him to produce documents identified in that notice at 9 o'clock on 26 May 1998 at Level 22, 240 Queen Street, Brisbane (the offices of the Australian Securities Commission). I have already indicated that there is in evidence before me signed certificates of failure to comply with the notices for the purpose of s 70(2) of the Australian Securities Commission Act 1989.
In my opinion, the notices comply with the statutory requirements as to the content of notices. I refer to the discussion in Australian Securities Commission v Avram (1997) 15 ACLC 70. The s 19 notice refers to "suspected contraventions of sections 1064 and 995 of the Corporations Law" and goes on to refer to the suspected offenders and the business scheme under investigation. The s 30 notice dated 21 May 1998, requires the production of, amongst other things, notes and correspondence relating to dealings, investments or loan agreements, lists of investors, bank statements for all accounts kept, notes, invoices and files relating to commissions, and salaries or fees paid to Mr White or to his wife.
I am satisfied that the documents "relate to" the affairs of the bodies corporate, namely, the fundraising scheme, in that they are documents which objectively evidence the business operation of that scheme: s 53 of the Corporations Law and the judgment of Drummond J in Australian Securities Commission v Lucas (1992) 10 ACLC 888 at 894 and 895, and 898 and 899. The description of the matter is, in my opinion, adequately identified in the first paragraph of the notice.
The notice requires the production of books relating to the affairs of a number of entities, including Len Smith: Len J. Smith Proprietary Limited ACN 002730752, Coastal Financial Services Pty Ltd ACN 003362141, Coastal Management Corporation IBC Number 2449/97, and documents concerning the dealings of those entities with or in relation to the person Leonard John Smith, a group "Coastal Financial Group", "Investors International" or any bank trading program or investment program.
The first two entities are registered corporations under the Corporations Law. The entity Coastal Asset Management Corporation IBC Number 2449/97 is not registered as a foreign company in Australia. Its status as an international business corporation is uncertain, although from the evidence it appears to have the ability to undertake activities of a body corporate and to be a body incorporated under the International Business Corporation Act (No 10 of 1996), being legislation of the Government of the Commonwealth of Dominica.
Having regard to the definition of "body corporate" in s 9 of the Corporations Law as including an “unincorporated registrable body”, and the definition of “a registrable body” as meaning “a registrable Australian body or a foreign company”, and the definition of a "foreign company" as meaning, relevantly:
“A body corporate incorporated...outside Australia” or “an unincorporated body that ... under the law of its place of formation ... may hold property in the name of its secretary or an officer of the body duly appointed for that purpose.”
In my opinion, the Dominican entity is a "registrable body as a foreign company", and thus, relevantly, “a body corporate”, or, alternatively, it is “an unincorporated registrable body”, and so, equally, "a body corporate". I am satisfied that Mr White is an eligible person within the definition of s 5(1) of the Australian Securities Commission Act 1989. That appears not only from the material but also from the oral statements from Mr White from the bar table before me a short time ago.
The bank account held at the National Australia Bank at Southport was entitled "Coastal Financial Group Trust Account trading as Coastal Financial Services P/L ACN 003362141 and Len J. Smith P/L ACN 002730752". A list of investors has a reference to an E.J. White against a number of those investors. A very telling piece of evidence is the fact that a loan agreement from Eagle Investments dated 10 February 1998 for $35,000, on its third page in schedule B, refers to the payment instructions being to the National Australia Bank, the account name being “W. Perkins and E. Miller”.
The signature "W. Perkins" appears “Wayne Francis Perkins”, and that signature has been witnessed by Errol John White, whose signature appears there and whose name is printed there. It is apparent from a comparison of the affidavit of Mr White filed on 10 June 1998 in these proceedings and the signature which appears as the witness to that loan agreement, that Mr White witnessed the loan agreement for $35,000 by Eagle Investments.
As I say, there is evidence that Mr White has been involved in the activities of entities the subject of the ASC investigation. He has acted, at least in some capacity, on behalf of some or other of the bodies corporate. The objection raised by Mr White and the explanation for his failure to comply with the notices is contained in a statutory declaration which appears as NC5 to the affidavit of Niall Coburn filed 14 May 1998. The series of documents which are contained in that exhibit contains, amongst other things, a statement said to emanate from Sir Harry Gibbs. It is attributed to Sir Harry that he said:
“I am a former member of the High Court and I wish to take this unusual method of informing you about a matter that is going to deeply affect us all. Unfortunately, a document such as this is too easily "lost" in the bureaucratic jungle in which we operate. A group of Australian Citizens have taken it upon themselves to test the validity of our current political and judicial system.
Later, this statement is attributed to him:
“The Governor-General's Letters Patent is a comedy of errors. We are greeted in the name of the Queen of Australia (titular title) who becomes the Queen of the United Kingdom in the next paragraph of the Letters Patent. This Queen gives instructions to the Governor General with reference to the Commonwealth of Australia Constitution Act 1900 UK. Here we have a clear breach of Article 2 paragraph 1 of the United Nations Charter. Under both UK and international law, the Queen is a British Citizen.
The final sentence attributed to Sir Harry Gibbs is:
“We would have to plead "no contest" against the worst type of terrorism when our current legal and political system came under international scrutiny!”
In essence, Mr White submitted that the Acts of the Constitution and the Acts of the Australian Parliament and the institution of our Courts and the validity of appointment of our judicial officers are all invalid. I think I can summarise Mr White's point by quoting from page 5 of one of the documents in that statutory declaration where Mr White says:
“I think now is the time for a summary. How could a colony now acknowledged by all world nations to be a sovereign nation retain exactly the same legal and political system it enjoyed as a colony without any change whatsoever to the basis for law.”
This point alone requires an answer.”
I am not satisfied that there is any basis on which it has been established that the notices are invalid, that inquiry or investigation by the ASC is improper, or that there has been any reasonable excuse for the failure by Mr White to comply with the requirements of each of the two notices that I have earlier referred to. In those circumstances, I make the following orders:
I order Errol John White comply with the requirements of the notice given to him under s 19 of the Australian Securities Commission Act 1989, which notice was dated 14 April 1998 and which was served on him personally on 15 April 1998. I direct that he comply with that order.
I direct that Errol John White comply with that notice by appearing at 9.30 am on Wednesday next, 1 July 1998, at Level 22, 240 Queen Street, Brisbane, for examination on oath or affirmation, and to answer questions put to him in relation to the investigation referred to in that notice.
I further order that pursuant to s 70(3) of the Australian Securities Commission Act 1989 Errol John White comply with the requirements of a notice given to him under s 30 of the Australian Securities Commission Act 1989, which notice was dated 21 May 1998, and which was personally served on him on 23 May 1998.
I direct that Errol John White comply with that notice by producing to Niall Coburn at 9.30 am on 1 July 1998 at Level 22, 240 Queen Street, the documents referred to in that notice in the numbered paragraphs 1, 2, 3 and 4.
The court further orders that Errol John White be restrained from damaging, defacing, destroying, or interfering in any way whatsoever with the documents, the subject of the notice under s 30 of the Australian Securities Commission Act, dated 21 May 1998, and served on him on 23 May 1998.
I have considered the question of costs. It seems to me that there is no reason why the ordinary rules should not apply. I order the respondent pay the applicant's costs of and incidental to the application, including reserve costs to be taxed if not agreed.
Lest there be any doubt about it, I direct compliance with the s 30 notice that I have identified by Mr White producing to Niall Coburn at 9.30 am on 1 July 1998 the documents referred to in the numbered paragraphs 1, 2, 3 and 4 of that notice.
I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender
Associate:
Dated: 24 June 1998
Counsel for the Applicant: Ms D O'Reilly Solicitor for the Applicant: Australian Securities Commission The Respondent appeared in person: Date of Hearing: 24 June 1998 Date of Judgment: 24 June 1998
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