Venice Nominees Pty Limited and the Companies Act 1981 [1992] ACTSC 56; (1992) 108 FLR 237 (11 June 1992)

SUPREME COURT OF THE ACT

VENICE NOMINEES PTY LIMITED and THE COMPANIES ACT 1981
No. SC 802 of 1991
Corporations
[1992] ACTSC 56; (1992) 108 FLR 237

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Corporations - offences - by company - application for order securing preservation of fund pending outcome of investigations.

Corporations - Administration of Corporations Law - functions and powers of ASC - power to conduct investigations where reason to suspect offence committed under "relevant previous law" - sources of power - prerequisites - statutory interpretation - whether investigation being carried out "under" the Companies Act 1981.

Words and phrases - "contravention" defined to include "offence".

Companies Act 1981, sub-s.573(1)

Corporations Law 1989 para 1323(1)(a)

Australian Securities Commission Act 1989, s.13

Dimella Constructions v. Stocker (1976) 14 SASR 215

Corporate Affairs Commission (SA) v. Lone Star Exploration NL No. 2 (1988) 50 SASR 24

Saraswati v. R [1991] HCA 21; (1991) 100 ALR 193

HEARING

CANBERRA
11:6:1992

Counsel for the applicant: Mr T. Howe

Solicitors for the applicant: Australian Government Solicitor

Counsel for the respondent: Mr S. Walmsley

Solicitors for the respondent: Elrington Boardman Allport

ORDER

THE COURT ORDERS THAT:

1. Ruling: there is uncontested evidence that an investigation
is being carried out under the Companies Act 1981 within the meaning
of sub-s.573(1) of that Act.
2. Stood over for further argument.

DECISION

This is an application made on behalf of the Australian Securities Commission (ASC) for an order which would have the effect of preventing a bank paying out the proceeds of an account held in the name of Mr Matteo Bortolussi. Mr Bortolussi was formerly a director of Venice Nominees Pty. Ltd. (the Company) now in liquidation. Mr Bortolussi is the respondent to the application.

2. The Company was incorporated in the Australian Capital Territory on 20 February 1975.

3. The application is made under the provisions of sub-s.573(1) of the Companies Act 1981 (the Companies Act), alternatively under paragraph 1323(1)(a) of the Corporations Law 1989 (the Corporations Law). A further alternative ground for the order sought is that it is in the nature of a Mareva injunction and that on the ordinary principles applicable to the granting of such relief, the order should be made.

4. On 16 October 1991 the ASC authorised the commencement of an investigation into the affairs of the Company. On that day an authorised delegate of the ASC declared in writing that "for the purposes of" s.13 of the Australian Securities Commission Act 1989 (the ASC Law) he had reason to suspect that a contravention of a "relevant previous law", being an offence against ss.229 and 556 of the Companies Act, may have been committed in relation to the affairs of the Company.

5. Sub-s.573(1) of the Companies Act where relevant provides as follows:

"Power of Court to prohibit payment or transfer of moneys,
securities or other property
573(1) Where -
(a) an investigation is being carried out under this Act in relation
to any act or omission by a person, being an act or omission that
constitutes or may constitute an offence against this Act;
.....
and the Court considers it necessary or desirable to do so for the
purpose of protecting the interests of any persons to whom the
person referred to in paragraph (a) .... (in this section referred
to as the "relevant person"), is liable or may be or become liable
to pay any moneys whether in respect of a debt, by way of damages or
compensation or otherwise, or to account for any securities or other
property, the Court may, on application by the Commission, make one
or more of the following orders:
(d) an order prohibiting, either absolutely or subject to
conditions, a person who is
indebted to the relevant person or to any person associated with the
relevant person from making a payment in total or partial discharge
of the debt to, or to another person at the direction or request of,
the person to whom the debt is owed;
(e) an order prohibiting, either absolutely or subject to
conditions, a person holding money, or securities or other property,
on behalf of the relevant person or on behalf of any person
associated with the relevant person from paying all or any of the
money, or transferring, or otherwise parting with possession of, the
securities or other property, to, or to another person at the
direction or request of, the person on whose behalf the money, or
the securities or other property, is or are held;
....."

6. It will be observed that para 573(1)(a) refers to an investigation "under this Act", that is, under the Companies Act.

7. Paragraph 1323(1)(a) of the Corporations Law, where relevant, provides as follows:

"Power of Court to prohibit payment or transfer of money,
securities, futures contracts or property
1323(1) Where:
(a) an investigation is being carried out under the Commission 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) ..... (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 securities, futures contracts or other property,
the Court may, on application by
the Commission or by an aggrieved person, make one or more of the
following orders:
(d) an order prohibiting a person who is indebted to the relevant
person or to an associate of the relevant person from making a
payment in total or partial discharge of the debt to, or to another
person at the direction or request of, the person to whom the debt
is owed;
(e) an order prohibiting a person holding money, securities, futures
contracts or other property, on behalf of the relevant person, or on
behalf of an associate of the relevant person, from paying all or
any of the money, or transferring, or otherwise parting with
possession of, the securities, futures contracts or other property,
to, or to another person at the direction or request of, the person
on whose behalf the money, securities, futures contracts or other
property, is or are held;
...."

8. The "Commission Act" referred to is the National Companies and Securities Commission Act (the NCSC Act): s.9 Corporations Law.

9. A preliminary point arises as to whether there is, in effect, a gap between the provisions of s.573 of the Companies Act on the one hand and s.1323 of the Corporations Law on the other, a gap which leaves no power in the ASC to carry out an investigation under the Corporations Law into a contravention of the Companies Act.

10. The difficulty is that the terms of sub-s.573(1) of the Companies Act authorise an investigation "under this Act", whereas the declaration which preceded the authorisation of the ASC to carry out the investigation into the affairs of the company on 16 October 1991 was expressed to be made "for the purposes of s.13 of the ASC Law" and not pursuant to the Companies Act. Unless the words "under this Act" in s.573 can be read to include the investigation authorised on 16 October 1991, it is conceded on behalf of the ASC that s.573 cannot apply to the present investigation.

11. On the other hand, sub-s.1323(1) of the Corporations Law applies only to investigations into a contravention or possible contravention of the Corporations Law itself. Unless the words "contravention of this Act" in sub-s.1323(1) can be read to include a contravention of the Companies Act, it is conceded on behalf of the ASC, that sub-s.1323(1) cannot apply to the present investigation.

12. It is necessary to look in some detail at the legislation relating to the formation and supervision of corporations in Australia.

13. According to sub-s.1(1) of the ASC Law, the objects of the ASC Law include the establishment of the ASC "to administer such laws of the Capital Territory, the States and the other Territories as confer functions and powers under those laws on the Commission" ("the Commission" being the ASC).

14. Part 2 of the ASC Law establishes the ASC (therein referred to as the Commission) as a body corporate. Sub-s.9(3A) provides that nothing in the ASC Law or any other law "prevents a person appointed as a full-time member from holding an appointment as a full-time member of the National Companies and Securities Commission under the National Companies and Securities Commission Act 1979". On the face of it, sub-s.9(3A) suggests that when it was enacted the intention was that the National Companies and Securities Commission (NCSC) should continue in existence notwithstanding the establishment of the ASC, although the NCSC appears to have retained little or no ongoing authority or power: see the general transitional provisions in s.1349 of the Corporations Law. Subsequently, however, Part 6 of the Corporations Legislation Amendment Act, Act No. 110 of 1991, repealed the NCSC Act and abolished the NCSC.

15. The functions and powers of the ASC are the subject of s.11 of the ASC Law. Sub-s.11(1) provides that the ASC has such functions and powers as are conferred on it by or under:

(a) the Corporations Act 1989;
(b) the Corporations Law of the Capital Territory;
(c) this Act.

16. Sub-section 11(1A) of the ASC Law provides as follows:

"11(1A) The Commission also has the functions and powers
expressed to be conferred upon the NCSC by or under:
(a) any Act that is a relevant Act for the purposes of the
Companies and Securities (Interpretation and Miscellaneous
Provisions) Act 1980; or
(b) any law of a State that corresponds to such an Act."

17. Part 3 of the ASC Law makes provision for investigation and gathering of information. Section 13, where relevant, provides as follows:

"General powers of investigation
13(1) The Commission may make such investigation as it thinks
expedient for the due administration of a national scheme law of
this jurisdiction where it has reason to suspect that there may
have been committed:
(a) a contravention of a national scheme law; or
(b) a contravention of a law of the Commonwealth or of a State
or Territory, being a contravention that:
(i) concerns the management or affairs of a body corporate; or
(ii) involves fraud or dishonesty and relates to a body corporate,
securities or futures contracts.
.....
13(3) Where the Commission has reason to suspect that a
contravention of a relevant previous law of this jurisdiction
may have been committed, the Commission may make such
investigation as it thinks appropriate. ..... 13(5) Where:
(a) immediately before the commencement of this subsection, the
NCSC was investigating a matter under a relevant previous law of
this jurisdiction; and
(b) either or both of subsections (1) and (3) empower the
Commission to investigate that matter;
then:
(c) the Commission may continue the NCSC's investigation of that
matter; and
(d) the investigation as continued by the Commission, is taken
to be an investigation under that subsection, or each of those
subsections, as the case may be."

18. In the present application the ASC relies on its powers under sub-s.13(3) of the ASC Law. It does not rely upon sub-s.13(1). It is necessary then to examine its powers under sub-s.13(3) to investigate contravention of a relevant previous law.

19. Section 5 of the ASC Law is the interpretation section and sub-s.5(3) provides as follows:

"5(3) Except so far as the contrary intention appears in this
Act, Parts 1.2 and 1.3 (except section 8) of the Corporations Law
apply for the purposes of this Act as if the provisions of this Act
were provisions of that Law."

20. Going then to the Corporations Law, Part 1.2 of the Corporations Law contains s.9 and therefore s.9 applies for the purposes of the ASC Law as if the provisions of the ASC Law were provisions of the Corporations Law.

21. Section 9 of the Corporations Law is the "dictionary" section and it contains a definition of the term "relevant previous law". That definition is as follows:

""relevant previous law", in relation to a jurisdiction, means:
(a) in the case of the Capital Territory - a relevant Act within
the meaning of the Companies and Securities (Interpretation and
Miscellaneous Provisions) Act 1980;
....."

22. Going then to the Companies and Securities (Interpretation and Miscellaneous Provisions) Act 1980 (the CSI Act), there is found the following further definition:

"Relevant Acts
3(1) For the purposes of this Act, each of the following Acts is a
relevant Act:
(a) this Act;
(b) the National Companies and Securities Commission Act 1979;
(c) the Companies (Acquisition of Shares) Act 1980;
(d) the Companies (Acquisition of Shares - Fees) Act 1980;
(e) any Act that contains a relevant application provision;
(f) any Act amending this Act or amending an Act referred to in
paragraph (b),(c),(d) or (e).
(2) For the purposes of paragraph (1)(e) a provision in an Act is
a relevant application provision if the provision states that this
Act applies to the Act concerned."

23. The Companies Act 1981, sub-s.3(3) provides as follows:

"Objects of application
3(3) The Companies and Securities (Interpretation and Miscellaneous
Provisions) Act 1980 applies to this Act."

24. This, in my view, means that the ASC Law is to be taken to subsume the definition sections in Parts 1.2 and 1.3 of the Corporations Law and that as a result the Companies Act is "a relevant Act" within para. 11(1A)(a) and a "previous relevant law" within sub-s.13(3) of the ASC Law. Hence the contraventions which the ASC may investigate in exercising the power conferred by sub-s.13(3) include suspected "contraventions" of the Companies Act. A contravention in the ordinary sense of that word involves an infringement or violation of a rule or standard or norm. A contravention of an Act does not necessarily involve the commission of an offence unless the Act or the law otherwise makes it so (cp. Dimella Constructions v. Stocker (1976) 14 SASR 215). However, it is difficult to see how an offence against an Act, that is against the provisions of the Act, is not also a contravention of the Act. In other words, a contravention of an Act includes an offence against the Act. Contraventions of the Companies Act therefore include acts or omissions constituting offences against the Companies Act. Thus the investigation commenced by the ASC on 16 October 1991 into the affairs of the company on the ground of suspected contravention of the Companies Act was within the power conferred by sub-s.13(3).

25. However, the NCSC Act is also "a relevant Act" for the purposes of the powers and functions conferred by para.11(1A)(a), that is to say, the powers and functions of the NCSC. In other words, there are two sources from which the ASC derives power in relation to investigations. By para 11(1A)(a) it has conferred on it the powers of investigation that the NCSC had under the Companies Act and under the NCSC Act, and it has the power independently conferred by s.13(3) to investigate a suspected contravention of the Companies Act. These powers appear certain to overlap; they are probably not co-extensive, but that is not to the point.

26. The NCSC had power under Part VII of the Companies Act to investigate the affairs of a corporation. The affairs of a corporation include, in my view, suspected offences against the Companies Act in relation to the corporation under investigation.

27. When the NCSC exercised that power, it did so pursuant to the Companies Act. When the ASC exercises its power to investigate contraventions of or offences against the Companies Act, it may be regarded as doing so by exercising the power it inherited from the NCSC derived from para.11(1A)(a) or by exercising the power derived from sub-s.13(3) of the ASC Law. In other words, once the ASC exercises its power to investigate a suspected contravention of or offence against the Companies Act, that power may be regarded as exercised in pursuance of para.11(1A)(a) or of sub-s.13(3) or of both. If it is regarded as in pursuance of para.11(1A)(a), then the power is exercised as the power of the NCSC and it is a power to conduct investigations in pursuance of the provisions of the Companies Act. The remaining question is whether the investigation by the ASC may itself be properly characterised as "under" the Companies Act.

28. I do not think that any special significance attaches to the word "under". Other terms spring to mind which do not appear to mean anything different. A proceeding "under" an Act may be regarded as one taken pursuant to the Act, in accordance with the Act, in furtherance of the Act, and so on. In relation to sub-s.573(1) itself, in Corporate Affairs Commission (SA) v. Lone Star Exploration NL No. 2 (1988) 50 SASR 24, von Doussa J. (with whom King C.J. and Jacobs J. agreed) said at 29 that "a civil proceeding 'instituted ... under this Code' will be one that seeks to enforce a right or obligation created by or incorporated into the Code". I agree and apply the same test to the investigations in question. An investigation into suspected offences against the Act is an investigation under that Act.

29. I arrive at that conclusion as a matter of statutory construction. It is not necessary, in my view, to enter upon a discussion of some of the more refined arguments which were presented by counsel. In particular, I do not consider it necessary to come to a decision on the submission put by Mr Howe for the ASC that the ASC Law should be construed as amending by implication the terms of para 573(1)(a) of the Companies Act to the effect that the words "under this Act" are omitted, or words such as "and under the ASC Law" are added. I do not think that the submission has to be taken so far for the point to succeed. However, in construing both pieces of legislation as I do, I do not leave out of account the so-called "purposive" approach. As Gaudron J. said in Saraswati v. R [1991] HCA 21; (1991) 100 ALR 193 at 204:

"It is a basic rule of construction that, in the absence of
express words, an earlier statutory provision is not repealed,
altered or derogated from by a later provision unless an intention
to that effect is necessarily to be implied. There must be very
strong grounds to support that implication, for there is a general
presumption that the legislature intended that both provisions
should operate and that, to the extent that they would otherwise
overlap, one should be read as subject to the other. See Butler v.
Attorney-General (Vic) [1961] HCA 32; (1961) 106 CLR 268, per Fullagar J. at 276,
and per Windeyer J. at 290."

30. Again it is not necessary for me to consider in depth the application of s.1328 of the Corporations Law which is as follows:

"Court may resolve transitional difficulties
1328.(1) Where any difficulty:
(a) arises in applying a provision of this Law in relation to a
particular case in relation to which, if this Law had not been
enacted, a previous law corresponding to that provision would
have applied; or
(b) arises, because of a provision of this Law, in applying, in
relation to a particular case, another such provision or a law
corresponding to another such provision;
the Court may, on the application of an interested person, make such
order as it thinks proper to remove the difficulty.
(2) An order under this section has effect despite anything in
a provision of this Law or in a corresponding previous law.
(3) This section has effect subject to the Constitution."

31. I would add in this regard merely that my construction of the legislation appears to be assisted rather than hampered by s.1328.

32. I therefore hold that there is uncontested evidence before me that an investigation is being carried out under the Companies Act in relation to an act or omission that constitutes or may constitute an offence against the Companies Act. I will go on to consider the application in order to decide whether it is necessary or desirable, for the purpose of protecting the interests of any person to whom the respondent is or may become liable to pay moneys, for the Court to make an order under para 573(1)(b) or (e) of the Companies Act.

33. I do not consider that there is any material before me to lead to the conclusion that an investigation is being carried out in relation to an omission that constitutes or may constitute a contravention of the Corporations Law, and accordingly I hold that the ASC is unable to succeed on its claim under para.1323(1)(a).

34. I have not made any decision whether the ASC is or is not entitled to succeed in its alternative claim for a Mareva injunction.