Platcher, in the matter of Platcher v Joseph

Case [2003] FCA 9

FEDERAL COURT OF AUSTRALIA

Platcher, in the matter of Platcher v Joseph [2003] FCA 9

BANKRUPTCY – annulment of bankruptcy 

COMPANY LAW - insolvent under administration - not to manage a corporation without leave of Court – disqualification from managing a corporation – repeated contraventions of the Corporations Act 2001 (Cth) – relevant prohibitions designed to protect the public – whether disqualification justified

Corporations Act 2001 (Cth) ss 206A, 206E, 1330 and Pt 10
Corporations Law s 229(1)
Bankruptcy Act 1966 (Cth) s 153B

Ozer v Australian Liquor Marketers Pty Ltd [2001] FCA 1197 cited
MacDonald v Official Trustee in Bankruptcy (2001) 107 FCR 72 at 73 cited
Re Wakim; ex parte McNally (1999) 198 CLR 511 cited
R v Hughes (2000) 202 CLR 535 cited
Australian Securities and Investments Commission v Parkes (2001) 38 ACSR 355 cited
Poyser v Commissioner for Corporate Affairs [1985] VR 533 cited
Commissioner for Corporate Affairs v Bracht [1989] VR 821 followed
Re Minimix Industries Ltd (1992) 1 ACLR 511 cited
Re Marsden (1981) 5 ACLR 694 cited
Commissioner for Corporate Affairs v Ekamper (1987) 12 ACLR 519 cited
Australian Securities Commission  v Roussi (1999) 32 ASCR 568  cited
Australian Securities Commission  v Forem Freeway Enterprises [1999] FCA 179 cited

IN THE MATTER OF CHARLES EDWARD PLATCHER V JOSEPH
N 7032 OF 2002

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION v CHARLES EDWARD PLATCHER
N 3019 OF 2002

STONE J
13 JANUARY 2003
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 3019 OF 2002

BETWEEN:

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
APPLICANT

AND:

CHARLES EDWARD PLATCHER
RESPONDENT

JUDGE:

STONE J

DATE OF ORDER:

13 JANUARY 2003

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to s 206E of the Corporations Act 2001 (Cth) the respondent is disqualified from managing corporations for a period of 25 years from the date of these orders.

2.The respondent be responsible for the costs of this proceeding.

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

N 7032 OF 2002

BETWEEN:

CHARLES EDWARD PLATCHER
APPLICANT

AND:

PAUL FRANCIS JOSEPH
RESPONDENT

JUDGE:

STONE J

DATE OF ORDER:

13 JANUARY 2003

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.        The application for annulment of bankruptcy is dismissed with costs. 

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

N 3019 OF 2002
N 7032 OF 2002

BETWEEN:

AND:

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
APPLICANT

CHARLES EDWARD PLATCHER
RESPONDENT

BETWEEN:

AND:

CHARLES EDWARD PLATCHER
APPLICANT

PAUL FRANCIS JOSEPH
RESPONDENT

JUDGE:

STONE J

DATE:

13 JANUARY 2003

PLACE:

SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION

  1. On 12 February 1999 Charles Edward Platcher became a bankrupt following a sequestration order made on the petition of Paul Francis Joseph.  Mr Joseph claimed a debt of $16,320.15 arising from a judgment of the New South Wales Local…

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AGLC
Platcher, in the matter of Platcher v Joseph [2003] FCA 9
Case
[2003] FCA 9
Decision Date

CaseChat Overview and Summary

In the matter of Platcher v Joseph, the Australian Securities and Investments Commission (ASIC) alleged that Mr Platcher committed offences under s 206A of the Corporations Act and its predecessor legislation during a specified period. Mr Platcher, who was a disqualified manager due to being an undischarged bankrupt and an insolvent under administration, was accused of managing Growthcorp, an Australian Proprietary Company. The legal issues before the court involved determining if Mr Platcher's conduct constituted "managing a corporation" under the relevant legislation and whether he was strictly liable for the alleged offences. The court examined the legislative framework, including the transition from the Corporations Law to the Corporations Act, and the strict liability nature of the offence under the Corporations Law.

The court found that Mr Platcher's actions, such as providing instructions to Growthcorp's directors and employees and influencing the company's financial standing, met the criteria for "managing a corporation" as defined under the Corporations Law. The court highlighted the broad interpretation of management activities, emphasizing that they included policy and decision-making roles affecting the corporation's financial standing or conduct. Given that Mr Platcher was disqualified from managing corporations during the relevant period, he was found to have committed the alleged offences under s 206A of the Corporations Act. Consequently, Mr Platcher was disqualified from managing corporations for 25 years from the date of the order. Additionally, the court dismissed his application for the annulment of his bankruptcy, ordering him to bear the costs of the proceeding.

Orders

Orders of the court

1. Pursuant to s 206E of the Corporations Act 2001 (Cth) the respondent is disqualified from managing corporations for a period of 25 years from the date of these orders.

2. The respondent be responsible for the costs of this proceeding.

1. The application for annulment of bankruptcy is dismissed with costs.

Background

Background to the litigation

ASIC alleges that the second contravention occurred during the period from 12 February 1999 (the date of the relevant sequestration order) to 4 December 2000 (the date on which interlocutory orders were made by the Supreme Court). ASIC alleges that during this period (the ‘alleged management period’) Mr Platcher committed an offence, or a series of offences, under s 206A of the Corporations Act and its predecessor legislation. LEGISLATIVE BACKGROUND TO THE ALLEGED CONTRAVENTIONS Before considering Mr Platcher’s conduct further however it is necessary to examine the legislative background against which the issues raised by ASIC must be decided. Since the commencement of the alleged management period there have been a number of changes to the corporations legislation relevant to Mr Platcher’s conduct and the question of whether he has committed offences within the meaning of s 206E(1)(a)(ii). The Corporations Act commenced on 15 July 2001. Before that the applicable legislation was the Corporations Law Scheme that commenced on 1 January 1991. Under that scheme the substantive corporate law provisions were contained in the Corporations Act 1989 (ACT). Legislation in the States and in the Northern Territory applied those provisions within their own jurisdictions thereby creating a uniform national scheme, the Corporations Law. The scheme was administered by ASIC which is a Commonwealth body established under the Australian Securities and Investments Commission Act 1989 (Cth). The States and the Northern Territory also picked up relevant provisions of that Act as well as conferring certain powers of administration and enforcement on Commonwealth authorities such as the Director of Public Prosecutions and the Federal Police. It is well known that two decisions of the High Court, Re Wakim; ex parte McNally (1999) 198 CLR 511 (‘Wakim’) and R v Hughes (2000) 202 CLR 535 (‘Hughes’), held that significant aspects of the national scheme were invalid with the result that the scheme foundered. The problem created by the decisions in Wakim and Hughes was solved by having the States refer certain powers to the Commonwealth under s 51 (xxxvii) of the Commonwealth Constitution and creating a replacement legislative scheme of which the Corporations Act is the centrepiece. Two important aspects of the replacement legislation are (a) that it contains provisions designed to validate actions of Commonwealth officers and authorities that may have been invalid as a result of Hughes; and (b) that it re-enacted the provisions of the Corporations Law and contained detailed transitional provisions in Pt 10 of the Corporations Act to facilitate a smooth transition to the present regime so that ‘individuals, bodies corporate and other bodies are, to the greatest extent possible, put in the same position’ as they would have been under the Corporations Law; s 1370, see also s 1398. To that end rights and liabilities equivalent to those that existed under the Corporations Law were created under the Corporations Act; see Division 6 of Pt 10.1, in particular s 1400 to s 1403. Legislative provisions relevant to the disqualification proceedings

Evidence

Evidence Before The Court

The difficulties discussed in Bracht do not arise in determining if an offence has been committed under s 206A of the Corporations Act. The section provides that a person who is disqualified from managing corporations commits an offence if:‘(a)they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or (b)they exercise the capacity to affect significantly the corporation’s financial standing; or(c)they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation:(i)knowing that the directors are accustomed to act in accordance with the person’s instructions or wishes; or(ii)intending that the directors will act in accordance with the person’s instructions or wishes.’ THE EVIDENCE ASIC relies on the evidence of ten witnesses. I shall examine the evidence of each of these witnesses. Nathan Morgan Mr Morgan’s evidence was as follows. His involvement with Mr Platcher started in October 1998 when Darryl Morrison, a friend of Mr Morgan’s family and the manager of a hotel where he was working at that time introduced them. It seems that Mr Platcher was aware, apparently having being informed by Mr Morrison, that Mr Morgan was likely to inherit property from his grandmother. Mr Platcher introduced himself as a director of Growthcorp and invited him to invest in a hotel in Townsville and in land adjoining the hotel. In due course Mr Morgan reviewed a valuation report and financial information provided by Mr Platcher. Although he did not understand all of it he was impressed by the pictures of the hotel and the prospect of obtaining a one third share in the property. Mr Morgan agreed to invest $150,000 and Mr Platcher was to instruct solicitors to draw up a contract. In November 1998 Mr Morgan visited Mr Platcher at his home in Glebe expecting to sign a deed formalising this investment. Mr Platcher wrote out a deed by hand and stamped it with the seal of Growthcorp. A copy of the deed annexed to Mr Morgan’s affidavit states that he had agreed to provide to Growthcorp the sum of $240,000. Mr Morgan stated that he had agreed to invest only $150,000. Evidently the money was to be used to finance the purchase of the hotel and land and Mr Morgan understood that he was required to provide a personal guarantee of the mortgage. Mr Morgan also worked for Growthcorp from March 1999 to February 2000. The arrangement appears to have been informal and haphazard. During the time he worked for Growthcorp (until February 2000) a number of different offices were used; some in the Sydney CBD, in Surry Hills and in Platcher’s home in Glebe. Mr Morgan stated that while he worked at Growthcorp he received all of his instructions from Mr Platcher. He also observed that John Grego, Growthcorp’s accountant, received his instructions from Mr Platcher. Mr Grego would type all of the company’s letters, which would be signed by Mr Platcher.

Decision

Reasons for decision

STONE J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: STONE J

Section 206B(3) of the Corporations Act states that a undischarged bankrupt is disqualified from managing corporations. A similar provision applied under s 229(1) of the Corporations Law, which states that ‘an insolvent under administration’ must not manage a corporation without the leave of the Court. As I have rejected Mr Platcher’s application to have the bankruptcy that commenced on 12 February 1999 annulled, there is no dispute that during the alleged management period Mr Platcher was an undischarged bankrupt and ‘an insolvent under administration’; see definition s 9 Corporations Law. Therefore, until his bankruptcy was discharged by operation of law on 11 June 2002, he was disqualified from managing a corporation. Offence under Corporations Law Under s 229(1) of the Corporations Law an offence is committed if the conduct of the insolvent person constitutes managing a corporation within the meaning of the section. In Australian Securities and Investments Commission v Parkes (2001) 38 ACSR 355 (‘ASIC v Parkes’) at 357, Austin J pointed out that s 229(1) is a strict liability provision ‘in the sense that the prosecutor or plaintiff does not have to prove the insolvent under administration acted with a guilty mind’; see also Poyser v Commissioner for Corporate Affairs [1985] VR 533. It is however, necessary to prove that the person’s conduct is properly described as ‘managing a corporation’. Growthcorp is an Australian Proprietary Company registered and incorporated in New South Wales and therefore is a ‘local corporation’ within the meaning of the definition in s 9 of the Corporations Law. In relation to local corporations s 91A(2) provides some assistance stating that:‘A person manages a local corporation if the person, in this jurisdiction or elsewhere, is a director or promoter of, or is in any way (whether directly or indirectly) concerned in or takes part in the management of, the corporation.’ In Commissioner for Corporate Affairs v Bracht [1989] VR 821 (‘Bracht’) Ormiston J had to decide, under s 227(1) of the Companies (Victoria) Code if the defendant had taken part in the management of a corporation. Ormiston J referred to the predominately protective nature of the provision and stated that it should be given a broad operation. His Honour pointed out however that the section was not intended to deny a person in the ‘prescribed categories’ the right to earn a living:‘As it is a protective section, protective at least of the creditors and shareholders, then it must have been designed to prevent the participation in management of those who might put the solvency or the probity of the corporation’s administration at risk. Persons not given any significant discretion or advisory role in decision-making could not therefore be intended as an object of the prohibition.It may be difficult to draw the line in particular cases, but in my opinion the concept of “management” for present purposes comprehends activities which involve policy and decision-making, related to the business affairs of a corporation affecting the corporation as a whole or a substantial part of that corporation, to the extent that the consequences of the formation of those policies the making of those decisions may have some significant bearing on the financial standing of the corporation or the conduct of its affairs.’