Financial Custodian Corporation of Victoria Pty Ltd v Taylor, J.D.J & Australian Securities Commission

[1991] FCA 649

Re: FINANCIAL CUSTODIAN CORPORATION OF VICTORIA PTY. LTD.; TIMOTHY JOHN
DONOHUE and GEOFFREY KENNETH STEEN
And: JASON D.J. TAYLOR and AUSTRALIAN SECURITIES COMMISSION
No. V G278 of 1991
FED No. 649
Corporations
9 ACLC 1431/6 ACSR 215

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Gray J.(1)

CATCHWORDS

Corporations - investigation - notices to produce documents - whether Australian Securities Commission capable of investigating affairs of provident society - interlocutory application - whether serious question to be tried.

Administrative Decisions (Judicial Review) Act 1977 s.15

Industrial and Provident Societies Act 1958 (Vic.) ss. 3, 21

Australian Securities Commission Act 1989 ss. 28, 30, 33

Companies (Victoria) Code (repealed)

Corporations (Victoria) Act 1990 ss. 3, 13, 84, 90

Securities Industry (Victoria) Regulations (repealed) r. 26

Securities Industry (Victoria) Code (repealed) Corporations Law

Australian Securities Law

HEARING

MELBOURNE

#DATE 1:11:1991

Counsel for the applicants: Dr C.L. Pannam QC, Mr T. North

Solicitors for the applicants: Rockman and Rockman

Counsel for the respondents: Mr D. Strong

Solicitors for the respondents: Regional General Counsel for Victoria

JUDGE1

On 23rd October 1991, a hastily prepared application was argued before me. It was put as an application pursuant to s.15 of the Administrative Decisions (Judicial Review) Act 1977 ("the ADJR Act"), to suspend the operation of certain decisions or to stay any proceedings under those decisions. On that day, after hearing argument, I made an order dismissing the application for interlocutory relief, and announced that I would publish my reasons on a later date. I now publish those reasons.

1. The first applicant appears to be a company, although no material was placed before the Court as to its place of incorporation. The second applicant is a former director of the first applicant, who resigned as a director some months ago. The second applicant is a director of Australian Share Trading and Underwriting Limited ("A.S.U.L."), which is a provident society, registered pursuant to the Industrial and Provident Societies Act 1958 (Vic.). By virtue of s.21 of that Act, it is "a body corporate".

2. In the application which has been filed, it is alleged that the first applicant is the trustee of International Lotto Fund, established by a trust deed dated 1st May 1990, as amended by a supplemental deed dated 20th February 1991. It is also alleged that the International Lotto Fund is managed by A.S.U.L. No evidence is provided to verify these allegations; nor is there any evidence as to the nature of the International Lotto Fund. Counsel for the applicants informed me from the bar table that units in the International Lotto Fund are sold to subscribers, and the proceeds are invested in lotteries throughout the world.

3. Tendered in evidence by consent were three notices, each dated 18th October 1991, purporting to follow Form 2 in the Australian Securities Commission Regulations. One notice is addressed to each of the applicants. Each is specified to be "In relation to an investigation of International Lotto Fund for the period of 1st July 1990 to date of notice". The notice addressed to the first applicant purports to be based on s.30(a) of the Australian Securities Commission Act 1989. The other two notices purport to be based on s.33(a) of that Act. In each case, the relevant applicant is required to produce to the first respondent at 10.00 a.m. on a designated date at a designated place, "the books as are specified in Schedule A annexed hereto." Attached to each notice is a page designated as "Schedule A", which contains a list of various categories of documents. These categories are preceded by the words "Books to be produced relating to the affairs of". The blank space following these words has not been filled in. This makes the schedule largely unintelligible to the recipient of the notice, although some requirement to produce some documents may be distilled from it. Counsel for the applicants did not take any point relating to the form of the notice; their concern was to argue that the second respondent, the Australian Securities Commission, had no power to investigate the affairs of the International Lotto Fund and therefore no power to issue notices requiring documents to be produced as part of such an investigation. It is obvious that the defects in the existing notices could be cured by the issue of fresh notices with the blank space filled in appropriately. The decisions of which review is sought in the substantive application under the ADJR Act are the decisions to issue and serve the three notices.

4. Section 3(4) of the Industrial and Provident Societies Act 1958 (Vic.) provides as follows:
   

"(4) Except insofar as this Act otherwise expressly provides, the provisions of the Companies (Victoria) Code do not apply to societies."

The word "Society" is defined in s.3(1) as meaning an industrial and provident society registered or deemed to be registered under the Act. On 1st January 1991, the Companies (Victoria) Code was repealed, when the new scheme for the regulation of corporations in Australia came into existence. Section 90(2) of the Corporations (Victoria) Act 1990 provides as follows:

"(2) Subject to subsection (4) and to any regulations in force

under subsection (7), a reference in an instrument to a co-operative scheme law is to be taken to include a reference to such provisions of the national scheme laws of this jurisdiction as correspond to

provisions of the co-operative scheme law."

This apparently meaningless provision requires reference to several others in order that some meaning may be elicited from it. By a combination of s.13(5)(a) and s.90(1), the word "instrument" means an Act. By a combination of s.3(1) and s.84, the Companies (Victoria) Code is a co-operative scheme law. By s.3(1), the national scheme laws of this jurisdiction are the Corporations (Victoria) Act 1990, the Corporations Law of Victoria and the Australian Securities Commission Law of Victoria. Thus, s.3(4) of the Industrial and Provident Societies Act 1958 (Vic.) is to be taken as exempting a society registered under that Act from the provisions of the Corporations (Victoria) Act 1990, the Corporations Law of Victoria and the Australian Securities Law of Victoria which correspond to provisions of the now repealed Companies (Victoria) Code.

1. Counsel for the applicants also made reference to regulation 26(2) of the Securities Industry (Victoria) Regulations, made under the Securities Industry (Victoria) Code, which they contended absolved A.S.U.L. from the need to have any licence to sell interests in the International Lotto Fund, prior to 1st January 1991. Counsel for the applicants did not attempt to refer to any legislation currently in force giving a similar exemption to A.S.U.L.

2. Section 30 of the Australian Securities Commission Act 1989 provides as follows:
   

"The Commission may give to:

(a) a body corporate that is not an exempt public authority; or

(b) .......;

a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books

relating to the affairs of the body."

Section 33 of the same Act provides as follows:

"The Commission may give to a person a written notice requiring the production to a specified member or staff member, at a specified

place and time, of specified books that are in the first-mentioned person's possession and relate to:

(a) affairs of a body corporate; or

(b) ......".

The exercise of the powers contained in ss.30 and 33 is limited by s.28 of the Australian Securities Commission Act 1989, which provides:

"A power conferred by this Division...may only be exercised:

(a) for the purposes of the performance or exercise of any of the Commission's functions and powers under a national scheme law of this jurisdiction; or

(b) for the purposes of ensuring compliance with a national scheme law of this jurisdiction; or

(c) in relation to:

(i) an alleged or suspected contravention of a national

scheme law of this jurisdiction; or

(ii) an alleged or suspected contravention of a law of this

jurisdiction, being a contravention that concerns the

management or affairs of a body corporate, or involves

fraud or dishonesty and relates to a body corporate,

securities or futures contracts; or

(d) for the purposes of an investigation under Division 1."

1. Even assuming that the argument put on behalf of the applicants is correct, to the extent that A.S.U.L. has a blanket exemption from some (presently unidentified) provisions of the current Corporations Law of Victoria, it plainly does not follow that the Australian Securities Commission is without power to conduct any investigation to which documents sought by the notices the subject of this proceeding might be relevant. It should be noted that the first applicant, being apparently a company, has not been shown to have the benefit of any exemption such as is suggested to operate in favour of A.S.U.L. It might be possible that the second and third applicants could be subject to investigation, even as to their involvement as directors of A.S.U.L. As counsel for the respondents pointed out, there are provisions in the corporations law which might catch natural persons, and into the question of contravention of which the Commission may wish to enquire. Examples are s.1064, which prohibits a person, other than a public corporation, making available, offering for subscription or purchase, or issuing an invitation to subscribe for or buy, any prescribed interest. Similarly, s.1078 prohibits a person from going from place to place issuing invitations to subscribe for or buy securities of a corporation, or offering securities of a corporation for subscription or purchase. Further, from the words of s.28(c)(ii) of the Australian Securities Commission Act 1989 itself, it appears that the Commission could conduct an investigation into possible breaches of the general criminal law involving fraud or dishonesty. Any activities of A.S.U.L., or of the applicants, outside of the state of Victoria may still be subject to investigation by the Commission.

2. The applicants based their case solely upon the claimed exemption of A.S.U.L. from certain provisions of the Corporations Law of Victoria, the earlier corresponding exemption, and the exemption prior to 1st January 1991 from licensing requirements. In so doing, they failed to show that the Australian Securities Commission was not capable of conducting a legitimate investigation into the affairs of A.S.U.L., or of the applicants themselves. They therefore failed to make out a serious issue to be tried as to whether the issue of the notices pursuant to ss.30 and 33 of the Australian Securities Commission Act 1989 was beyond power. For these reasons, I dismissed the application for interlocutory relief. It was not necessary for me to consider the question of the balance of convenience.