Re RG Munro Futures Pty Ltd
[2010] QSC 435
•19 November 2010
SUPREME COURT OF QUEENSLAND
CITATION:
Re RG Munro Futures Pty Ltd [2010] QSC 435
PARTIES:
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
(respondent/applicant)
v
ROGER GARETH MUNRO
(applicant/first respondent)
AND
R G MUNRO FUTURES PTY LTD (ACN 085 857 165) IN LIQUIDATION)
(second respondent)
AND
STARPORT FUTURES TRADING CORPORATION (USCN 2917 4448 1000 981 262 652)
(third respondent)FILE NO/S:
BS9846/09
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
19 November 2010
DELIVERED AT:
Brisbane
HEARING DATE:
20 August 2010
JUDGE:
Martin J
ORDER:
THE APPLICANT IS TO BRING IN MINUTES OF ORDER
CATCHWORDS:
CORPORATIONS – WINDING UP – GENERALLY – OTHER MATTERS – where the director of a company was ordered to surrender his passport pending investigation – where the Commonwealth Director of Public Prosecutions subsequently determined there was no reasonable prospect of conviction on material briefed – whether the passport should be returned
Australian Securities and Investments Commission Act 2001 (Cth), s 19, s 33
Corporations Act 2001 (Cth), s 530C, s 911A, s 1323ASIC v Burnard (2007) 64 ACSR 360
ASIC v Hawley (2008) 250 ALR 57
ASIC v Lee [2007] FCA 508
ASIC v Marsh Bell Hawkins (2003) 43 ACSR 340
Re Richstar Enterprises Pty Ltd (2006) 57 ACSR 307COUNSEL:
D R Tucker (solicitor) for the applicant
J H Dalton SC and E Wilson for the respondent
SOLICITORS:
Tucker & Cowen Solicitors for the applicant
Australian Securities and Investments Commission for the respondent
[1] On 8 September 2009, the respondent to this application (“ASIC”) succeeded on an ex parte application under s 1323 of the Corporations Act 2001 (Cth) (“the Act”) to require that the applicant (“Munro”) surrender his passport to the Court. This is an application by Munro for the return of that passport.
Background
[2] Munro was the sole director of the second (“Starport”) and third (“RGMF”) respondents. ASIC alleges that:
(a) through these two companies Munro conducted a financial services business within the meaning of s 911A of the Act without a licence;
(b) the monies of all the respondents were mixed in running that business;
(c) about 65 investors lent money to either Starport or RGMF to pool and trade on their behalf;
(d) Munro says he traded in about 36 shares, currencies, options, equities and the like; and
(e) that Munro provided a quarterly report to investors showing the profit on their investment.
[3] Both Starport and RGMF are in liquidation. ASIC has been investigating these matters and claims not to have been able to discover the location of approximately $94,000,000 of investor funds.
[4] In January 2009 ASIC served notices on Munro under ss 19 and 33 of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”).
[5] When ASIC obtained the order that Munro surrender his passport it also obtained orders under s 530C of the Act for search warrants in relation to Munro’s wife’s house, a storage facility and the home of Munro’s parents. Those searches were conducted.
[6] Before proceeding to consider the facts relevant to this application I will consider the principles which have been identified with respect to the application of s 1323 of the Act.
Section 1323
[7] Section 1323 relevantly provides:
“1323 Power of Court to prohibit payment or transfer of money, financial products or other property
(1) Where:
(a) an investigation is being carried out under the ASIC Act or this Act in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Act;
…
and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an aggrieved person) to whom the person referred to in paragraph (a), (b) or (c), as the case may be, (in this section called the relevant person), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for financial products or other property, the Court may, on application by ASIC or by an aggrieved person, make one or more of the following orders:
…
(j) if the relevant person is a natural person--an order requiring that person to deliver up to the Court his or her passport and such other documents as the Court thinks fit;
(k) if the relevant person is a natural person--an order prohibiting that person from leaving this jurisdiction, or Australia, without the consent of the Court.
…
(3) Where an application is made to the Court for an order under subsection (1), the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application.
(4) On an application under subsection (1), the Court must not require the applicant or any other person, as a condition of granting an interim order under subsection (3), to give an undertaking as to damages.
(5) Where the Court has made an order under this section on a person’s application, the Court may, on application by that person or by any person affected by the order, make a further order discharging or varying the first-mentioned order.
(6) An order made under subsection (1) or (2) may be expressed to operate for a specified period or until the order is discharged by a further order under this section.
(7) Nothing in this section affects the powers that the Court has apart from this section.”
[8] The application of the section and its intended function have been considered in a number of cases. For the purposes of this application, those authorities provide the following guidance.
(a)“[14] At the heart of s 1323 is a concern to protect the interests of aggrieved persons. The section aims to provide a means by which property that may in due course represent a source for the vindication of the rights of those persons is preserved for their benefit, shielded from inroads that might otherwise be made upon it.” ASIC v Burnard (2007) 64 ACSR 360.
(b)“[6] It is tolerably plain that s 1323(1) is directed to the protection of the interests of aggrieved persons (so defined). If the purpose for which the order is made is not for that purpose then the provision does not authorise the making of an order. The purpose of keeping [the respondent] within the jurisdiction to ensure that he is present if and when the Director of Public Prosecutions decides to prosecute him is not the purpose of protecting the interests of the aggrieved person. It follows that orders under s 1323(1) cannot be made for that purpose.” ASIC v Hawley (2008) 250 ALR 57.
(c)“[26] The circumstances in which the court may make orders under s 1323(1) are wide as indicated by the words ‘necessary or desirable … for the purpose of protecting the interests of a person …’. There is an element of risk assessment and risk management in the judgment the court is called on to make. It follows, and has been accepted, that there is no requirement on the part of ASIC to demonstrate a prima facie case of liability on the part of the relevant person or that the person’s assets have been or are about to be dissipated.” Re Richstar Enterprises Pty Ltd (2006) 57 ACSR 307.
(d)“[27] The nature and duration of orders made under s 1323(1) can be fashioned by the court to reflect its assessment of any risk of dissipation of the assets of a person under investigation.” Re Richstar Enterprises Pty Ltd (2006) 57 ACSR 307.
[9] While French J (as he then was) said, in Richstar, that there was no need for ASIC to demonstrate a prima facie case of liability on the part of the relevant person, it has been said by Finkelstein J in ASIC v Lee [2007] FCA 508 that a court should exercise care before making any order. He emphasised that, while it was not necessary to show that the aggrieved person, in fact, has a case against the relevant person, the strength of the case was important.
His Honour went on to say at [12]: “If the investigation is in [its] late stages, or has been completed, probably no order should be made (or continued) unless the evidence suggests a prime facie case of liability.” It has been observed by both French J and in other cases (see, for example, ASIC v Marsh Bell Hawkins (2003) 43 ACSR 340) that it is not necessary for an applicant to establish a prima facie case as the section does not require it. That, with respect, appears to be correct. However, it may be that if an investigation is in its late stages or has been completed, then an applicant will need to provide stronger evidence to support its case for the institution or continuation of an order under s 1323.
Applicant’s case
In the hearing before me, ASIC relied upon the same submissions it made before the Chief Justice.
In summary, they were:
(a) There was an ASIC investigation into contraventions of the Act.
(b) The relevant report had identified 65 investors who had loans with RGMF totalling over $93,000,000.
(c) Munro was liable to account to these investors because of the mixing of funds with his own.
(d) As the relevant sections of the Act relied upon are civil penalty provisions and orders for compensation may be made if damage is shown to result from contravention.
(e) Starport is the “aggrieved person” within the meaning of s 1323(1).
I note that Starport is in liquidation and that no proceedings have been commenced on its behalf.
At the hearing before the Chief Justice and, again, before me, ASIC submitted that it was necessary or desirable for Munro to remain in Australia because he is the only person who can:
(a) provide the information needed to understand the affairs of RGMF and Starport; and
(b) provide information as to remaining funds of those companies.
It was also submitted that as the remaining funds are overseas, and are difficult to trace, to allow Munro to depart the country while they remain accessible to him would expose those funds to risk.
ASIC’s investigation
Munro has been served with numerous notices under ss 19 and 33 of the ASIC Act. Those notices required him to attend an examination, or provide ASIC with assistance, or to produce documents. The last notice was delivered on 24 February 2010. It was later withdrawn.
While it might be accepted that Munro has, from time to time, been tardy in complying with his obligations under the notices, they appear to have been substantially complied with. There are no continuing accusations of non compliance.
ASIC has conducted a lengthy record of interview with Munro pursuant to its rights under the ASIC Act.
Prior to the order being made for the surrender of his passport, there had been an earlier, similar application which had been the subject of a number of hearings and which had, eventually, been unsuccessful. From the time at which Munro became aware that he was the subject of ASIC’s investigations – late January 2009 – until the order to surrender his passport was made, Munro had departed Australia on a number of occasions and had returned on each such occasion.
Dr Munro
Dr Munro points to the following matters as being relevant to this application:
(a) he has not been charged with any offence;
(b) he is not in breach of any court order;
(c) he has complied (albeit sometimes slowly) with ASIC’s requirements to the best of his ability;
(d) he maintains that he has produced all books and records as required by ASIC; and
(e) he says that there is nothing to suggest that he would not return should he depart Australia.
Subsequent material
On 4 November 2010, an affidavit of Michael Ross Ryan of ASIC was filed at the Supreme Court Registry. It relevantly provided:
“Referral of a Brief of Evidence to the CDPP
3. On Monday 1 November 2010, I received advice from the CDPP that it had completed its assessment of the Brief of Evidence referred to it by ASIC on 31 May 2010 (“ASIC’s Brief”) and had determined that there are no reasonable prospects of convictions being obtained for the charges recommended by ASIC in its Brief.
4. ASIC is now reviewing evidence in respect to other suspected contraventions of the Corporations Act and Queensland Criminal Code. This evidence did not form part of ASIC’s Brief. Further enquiries will be required to determine if sufficient admissible evidence is available to warrant the referral of a further Brief of Evidence to the CDPP. I anticipate that the aforementioned further enquiries will likely take approximately four months to complete, before a further Brief of Evidence (if appropriate) can be submitted to the CDPP.”
ASIC indicated that it did not want to make further submissions following the revelations in this affidavit. Mr Tucker, for Munro, submitted only that circumstances “…plainly now mean that the travel ban ought to be lifted and Dr Munro’s passport ought be returned to him. There is no other reasonable basis for retaining it.”
Munro has not been charged with any offence and, in light of the above new information, he is less likely to be a flight risk now that criminal proceedings are less likely to be commenced against him. Mr Tucker submitted at the original hearing that the applicant has strong links to Australia which further reduce the likelihood of his attempting to flee the country. Specifically, Munro:
(a) is an Australian citizen;
(b) has always resided, and continues to reside, in Australia;
(c) has significant family links in Australia, including his dependent elderly parents; and
(d) he receives ongoing medical treatment in Australia.
As French J said in Re Richstar: “The imposition of restrictions upon a person’s freedom of movement is a serious step not lightly to be undertaken.” (at 427). The continued imposition of such restrictions is no less serious. One might be forgiven for concluding that ASIC had presented its best case for consideration to the Commonwealth Director of Public Prosecutions and that, given the length of the investigation, the result demonstrates that there is no immediately obvious breach of the Act.
It follows from the above that pursuant to s 1323(5) of the Act, I will make an order that Munro’s passport be returned to him. I will, though, recognise the concerns expressed by ASIC which were to a greater or lesser degree supported by the evidence, by conditioning that order. If Munro wishes to use his passport then he will be subject to this regime: He may obtain his passport after giving fourteen days written notice to ASIC. If ASIC does not take any action seeking to prevent him going overseas then, upon him filing an affidavit deposing to the giving of that notice and the absence of action by ASIC, his passport will be released to him by the Court. On his return, he must then return the passport to the Court and the same conditions will apply.
Appropriate order
The applicant is to bring in appropriate minutes of order.
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