Centurion Trust Company Limited and Australian Securities and Inv estments Commission [2003] AATA 129 (10 February 2003)

Last Updated: 11 February 2003

DECISION AND REASONS FOR DECISION [2003] AATA 129

ADMINISTRATIVE APPEALS TRIBUNAL )

) No W2002/44

GENERAL ADMINISTRATIVE DIVISION )

	Re	CENTURION TRUST COMPANY LIMITED Applicant
	And	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Respondent

DECISION

Tribunal

Justice Garry Downes, President Murray Allen, Member

Date 10 February 2003

Place Perth

Decision

The matter is to be listed for directions at a time to be arranged by the parties with the District Registrar in Perth.

.................(sgd Justice Garry Downes).........

President

CATCHWORDS

CORPORATIONS - suspected contraventions of Corporations Law 1989 ss 615, 709, 710, 995, 1308, 1309 - Australian Securities Commission Law 1989 s 73 - ASIC restrained disposal of interest in securities - order may be made against persons who have not failed to comply with a requirement made under Australian Securities Commission Law 1989 Part 3 - Australian Securities Commission Law 1989 s 73 and s 75 - power to vary orders does not extend beyond power to make original order - Australian Securities Commission Law 1989 s 50 - order permitting disposal of securities on condition that proceeds be preserved may be within the scope and purpose of the law - Australian Securities Commission Law 1989 s 8, subs 11(4) - arguable that it is reasonably incidental to the performance of ASIC's functions to withhold an order restraining the sale of securities in return for an undertaking to deposit the proceeds with ASIC pending finalisation of its investigation

STATUTORY INTERPRETATION - Statutory Powers and Duties - Australian Securities Commission Law 1989 s 73 - meaning of `specified person' - order may be made against persons who have not failed to comply with a requirement made under Australian Securities Commission Law 1989 Part 3 - meaning of `restraining' - withdrawing restraint on condition analogous to court declining to grant interlocutory prohibitory injunction in return for undertakings

PRACTICE AND PROCEDURE - separate decision on certain issues - application for review of a decision not to revoke orders made under Australian Securities Commission Law 1989 s 73 and s 75 - Tribunal's powers limited to those conferred by Australian Securities Commission Law 1989 s 244

WORDS AND PHRASES - `specified person', `varying', `restraining'

Acts Interpretation Act 1901 (Cth)

Administrative Appeals Tribunal Act 1975 (Cth) s 45

Australian Securities Commission Law 1989 s 8, subs 11(4), ss 13, 41, 50, 71, 72, 73, 74, 75, 244

Corporations Law 1989 Pt 1.2 Div 5 and Div 8, ss 606, 613, 615, 709, 710, 995, 1308, 1309,

Mitchell v Henry (1880) 15 Ch D 181

Swan Hill Corporation v Bradbury (1937) 56 CLR 746

REASONS FOR DECISION

Background

1 Centurion Trust Company Ltd (`Centurion') is part of the Centurion Trust Group, a private group of companies domiciled in Jersey which provides management and administrative services. Centurion is the trustee of a trust called the Gold Coast Trust. In that capacity it held legal but not beneficial interests in more than six million shares in Welcome Stranger Mining Company NL (`WSM'), a listed public company.

2 In or about January 1998 the Australian Securities and Investments Commission (`ASIC'), then called the Australian Securities Commission, commenced an investigation pursuant to Part 3 of the Australian Securities Commission Law 1989 (`the ASIC Law') into dealings in the securities of WSM. That investigation is still continuing.

3 As part of its investigation ASIC sought information in relation to the shares held by Centurion in WSM. This was because ASIC believed that one or more persons, including former directors of WSM, held interests in shares of WSM which may have contravened provisions of the Corporations Law 1989 (`the Corporations Law'). ASIC was particularly concerned about contraventions of s 615 (Restrictions on acquisitions: the threshold test), s 709 and s 710 (Substantial shareholder to notify company of interests and changes in interests), s 995 (Deceptive or misleading conduct), s 1308 and s 1309 (False or misleading statements or information). As part of its investigation ASIC sought the production of documents and conducted compulsory examinations.

The Restraining Orders: Section 73 of the ASIC Law

4 In due course ASIC formed the opinion, pursuant to s 71 of the ASIC Law, that one or more persons other than Centurion had failed to comply with a requirement or requirements under Part 3 of the ASIC Law and for this reason information necessary for the investigation relating to the securities in WSM could not be found out. ASIC issued a series of orders pursuant to s 73 of the ASIC Law. The effect of the orders was to restrain Centurion from exercising voting or other rights attached to, or disposing of its interest in, a total of 6, 610, 914 shares in WSM.

5 On 4 June 1998 three orders were made under s 73 which related to Centurion. Two of the orders were addressed to Centurion and related to parcels of 1, 735, 000 and 3, 123, 000 WSM shares which were registered to Centurion on behalf of the Gold Coast Trust. The third was addressed to the Gold Coast Trust care of Centurion and related to 1, 752, 914 WSM shares registered to Diurnal Nominees Pty Ltd. Apart from containing different descriptions of the subject shares, and how they were held, the orders were in the same form. The following is an example:

`AUSTRALIAN SECURITIES COMMISSION

Orders Pursuant to ASC Law s73

To: Centurion Trust Company Limited

Centurion House

PO Box 702

Beresford Street

ST HELIER JERSEY

CHANNEL ISLANDS

Whereas:

A. The Australian Securities Commission ("Commission") is in the course of exercising its powers pursuant to Australian Securities Commission Act 1989 (Cth) by carrying out an investigation into whether Corporations Law ("CL") s615, s709, s710, s995, s1308 and s1309 have been contravened in relation to dealings with certain securities in Welcome Stranger Mining Company NL ACN 007 670 386 ("WSM").

B. In the Commission's opinion, information about the affairs of WSM and securities in WSM needs to be found out for the exercise of the Commission's powers in ASC Law as set out in Recital A. Specifically, such information concerns the true identity of, and the circumstances pursuant to which, all persons or entities have acquired the power (whether directly or indirectly) to:

(a) exercise, or control the exercise of, the right to vote attached to; or

(b) dispose of, or control the disposal of:

the 1,735,000 WSM Shares registered to Centurion Trust Company Limited and held on behalf of The Gold Coast Trust ("the Affected Shares").

C. The information in Recital B cannot be found out because persons have failed to comply with a requirement made under ASC Law Part 3.

Pursuant to ASC Law s73, you are hereby:

1. Ordered to restrain from disposing of any interest in the Affected Shares.

2. Ordered to restrain from exercising any voting or other rights attached to the Affected Shares.

3. Ordered to written notice of this order to any person whom you know to be entitled to exercise a right to vote attached to the Affected Shares.

Further, take notice that:

1. This Order remains in force until such time as the Commission makes an order varying or revoking it.

2. By ASC Law s75, copy attached, a person who fails to comply with an order in force under ASC Law s73 commits an offence the penalty for which is a fine of AUS$2,500 (AUS$12,500 for a corporation) or imprisonment for 6 months or both.

3. You have certain rights by way of appeal or review of the decision to make this order, which rights are set out in the Annexure to this Order entitled "Notification for Reviewable Decisions".

Date: 4 June 1998'

The Varying Orders: Section 75 of the ASIC Law

6 On 9 December 1998 ASIC wrote to solicitors for Centurion noting that it was aware of a share buy-back scheme available to shareholders in WSM, noting that it had been approached by other parties whose shares were the subject of s 73 orders and indicating that as it had agreed to vary the orders to permit those other shareholders to participate in the share buy-back scheme it would `extend the same invitation to the 6, 610, 914 WSM shares held by Centurion'. It identified its `specific proposal' as follows:

`1. ASIC will vary it's ASC Law s73 orders over the WSM shares held by Centurion for the sole purpose of enabling Centurion to participate in the WSM share buy back and/or to sell those shares on market, conditional on the proceeds of sale of the shares (less brokerage) being placed in an ASIC trust account (interest bearing).

2. Subject to paragraphs 3 and 4, the funds will remain in ASIC's trust account until it has finalised its investigation. This is consistent with the terms of the existing ASC Law s73 orders.

3. If your client (or any other person) wishes to have the funds released, the that person should write to ASIC marked to my attention setting out the basis of the claim and reasons why the funds should be released. ASIC will consider that request and respond within 14 days. This is essentially the same position as your client is in now as it is able to request that ASIC revoke its decision to make orders pursuant to ASC Law s73 pursuant to ASC Law s75.

4. If ASIC decides not to release the funds, your client is able to seek a determination from a court. ASIC reserves the right to oppose any application made by your client.'

7 This letter produced no immediate response from Centurion. However, nearly a year later, on 17 November 1999, Macquarie Day Cutten, brokers, wrote to ASIC saying they had been instructed to sell up to 3 million shares in WSM on behalf of Centurion, referring to the letter of 9 December, 1998 and asking ASIC to confirm it had no objection to the stock being sold subject to their paying `the net proceeds to your office to be held in trust.' The letter also raised queries relating to the other shares held by or on behalf of Centurion.

8 ASIC replied by letter dated 24 November 1999 relevantly as follows:

`Danny Watson

Macquarie Equities Limited

...

I refer to your facsimile dated 17 November 1999 and to our subsequent conversations concerning your application to vary the ASC Law s73 orders over the following shares in WSM Limited:

(a) the 1,752,914 WSM shares registered to Diurnal Nominees Pty Ltd held to the order of Centurion Trust Company Limited as trustee of the Gold Coast Trust;

(b) the 3,123,000 WSM Shares registered to National Nominees Limited held on account of Kas Depository Trust Co Limited on behalf of Centurion A/C Gold Coast Trust; and

(c) the 1,735,000 WSM shares registered to Centurion Trust Company

Limited held on behalf of the Gold Coast Trust.

At this stage, ASIC is presently minded to vary the orders to effectively allow the sale of the shares on market at market price on the condition that all proceeds of disposal of the shares are remitted directly to ASIC for deposit in an ASIC interest bearing trust account. Draft orders are attached for comment. Any comments should be marked for my attention and forwarded to this office by close of business on 25 November 1999.'

9 On the same day Centurion wrote to ASIC:

`The Trustees have instructed Mr. Danny Watson of Macquarie Day Cutten (Adelaide) to sell up to 3 million WSM Limited shares on market. We are fully aware and agree to the proceeds arising from this sale being held on an ASIC interest bearing trust account.

Please note that we are selling 3 million shares from our total holding of 6,610,914 shares.'

10 On 26 November 1999 ASIC made two orders varying the original orders affecting Centurion. They related to the parcels of 1, 735, 000 and 1, 752, 914 WSM shares. The order relating to the 1, 735, 000 parcel is in the following form:

`AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Variation of ASC Law s73 Orders pursuant to ASC Law s75(1)

To: Centurion Trust Company Limited

Centurion House

PO Box 702

Beresford Street

ST HELIER JERSEY

CHANNEL ISLANDS

Whereas:

A. The Australian Securities & Investments Commission ("Commission" or "ASIC"), formerly called Australian Securities Commission ("ASC"), is in the course of exercising its powers pursuant to Australian Securities Commission Act 1989 (C'th) by carrying out an investigation into whether Corporations Law ("CL") s615, s709, s710, s995, s1308 and s1309 have been contravened in relation to dealings with certain securities in WSM Limited ACN 007 670 386 ("WSM"), formerly called Welcome Stranger Mining Company NL.

B. In the Commission's opinion, information about the affairs of WSM and securities in WSM needs to be found out for the exercise of the Commission's powers in ASC Law as set out in Recital A. Specifically, such information concerns the true identify of, and the circumstances pursuant to which, all persons or entities have acquired the power (whether directly or indirectly) to:

(a) exercise, or control the exercise of, the right to vote attached to; or

(b) dispose of, or control the disposal of:

the 1,735,000 WSM Shares registered to Centurion Trust Company Limited ("Centurion") and held on behalf of The Gold Coast trust ("the Affected Shares").

C. The information in Recital B cannot be found out because persons have failed to comply with a requirement made under ASC Law Part 3.

D. The ASC made orders pursuant to ASC Law s73 on 4 June 1998, whereby you were:

1. Ordered to restrain from disposing of any interest in the Affected Shares.

2. Ordered to restrain from exercising any voting or other rights attached to the Affected Shares.

3. Ordered to give written notice of this order to any person whom you know to be entitled to exercise a right to vote attached to the Affected Shares.

Pursuant to ASC Law s75 (1), the orders made on 4 June 1998 as set out in Recital D are hereby varied to the extent that:

1. Centurion may dispose of any interest in the Affected Shares by instructing a Participating Organisation (as defined by the Australian Stock exchange Business Rules) to sell any of the Affected Shares on market at market price on the condition that the Participating Organisation shall remit all proceeds of disposal of any Affected Shares (less brokerage) directly to ASIC for deposit in an ASIC interest bearing trust account.

2. Subject to paragraph 3, the funds shall remain in ASIC's trust account until it has finalised its investigation

3. Any person seeking a release of the funds may write to ASIC setting out the basis of the claim and reasons why the funds should be released. ASIC will consider any such request and respond within 14 days.

Further, take notice that:

1. This Order remains in force until such time as the Commission makes an order varying or revoking it.

2. By ASC Law s75, copy attached, a person who fails to comply with an order in force under ASC Law s73 commits an offence the penalty for which is a fine of AUS$2,500 or imprisonment for 6 months or both.

3. You have certain rights by way of appeal or review of the decision to make this order, which rights are set out in the Annexure to this Order entitled "Notification for Reviewable Decisions".

Date: 26 11 99'

11 On 9 December 1999 ASIC made a varying order with respect to the parcel of 3,123,000 WSM shares. On 19 January 2000 further varying orders were made to enable Centurion to participate in a one for one options entitlement announced by WSM and to sell resulting options or shares on market or at market price. Further varying orders were made on 31 January 2000. Each of the varying orders contained a condition that the proceeds from any sale must be deposited in a trust account maintained by ASIC pending finalisation of its investigations. All shares and options owned by Centurion in WSM have now been sold on market and the proceeds placed in a trust account maintained by ASIC.

12 On 23 December 1999, after the first sale, ASIC wrote to Centurion confirming the receipt of the proceeds. The letter contained the following:

`I confirm that ASIC has received a cheque from Macquarie Equities Limited for the amount of $1,858,806.93, being the proceeds of sale of the 3,000,000 WSM shares. The proceeds have been deposited in an ASIC trust account. The account is a call deposit account. The applicable rate of interest is 4.00%. Please let me know if you require further information.'

13 Although not all of the varying orders are in the same form the parties have not put any submissions to us that the differences are relevant to the issues before us. Accordingly, we do not propose to set out the different forms of varying order.

The Proceedings

14 On 17 September 2001 Centurion applied to ASIC for the revocation of the orders and for payment to it of the trust funds. ASIC declined to revoke the orders. On 8 February 2002 Centurion applied to this Tribunal, pursuant to the right given by s 244 of the Act, for review of the refusal to revoke the varying orders. Included among the grounds for review were claims that ASIC did not have power to make either the original orders or the varying orders. These grounds were coupled with grounds asserting that the correct or preferable decision on the merits was that the order should be revoked.

15 This matter originally came before the Tribunal constituted by the acting President on an application to refer the above issues of power to the Full Court of the Federal Court of Australia pursuant to s 45 of the Administrative Appeals Tribunal Act 1975 (Cth) as questions of law relating to the scope of the powers given by s 73 and s 75 of the ASIC Law. The acting President agreed to hear argument on this application. By the time the application was argued a third issue had arisen, namely, whether Centurion, by its conduct, was estopped from denying the validity of ASIC's power to make the varying orders. The acting President declined to refer the three issues to the Federal Court but set the matter down for hearing on the basis that the application could be reagitated, if it seemed appropriate, at the hearing, when the Tribunal would have a much better understanding of the issues. The acting President directed that the hearing should not proceed beyond the three issues on the days allotted for the initial hearing. However, the Tribunal reserved to itself, if it was not satisfied that deciding the three issues in a preliminary hearing was appropriate, the right to adjourn the matter to enable all matters in dispute to be determined at the one time.

The Three Preliminary Issues

16 The three preliminary issues to be argued were agreed by the parties to be:

`1 Whether the Australian Securities and Investments Commission ("ASIC") has power to make an order pursuant to section 73 of the Australian Securities Commission Act 1989 (later the Australian Securities and Investments Commission Act 2001) ("the ASIC Act"), restraining the exercise of voting or other rights in respect of and disposing of any interest in specified securities, against persons other than those who have failed to comply with a requirement made under Part 3 of the ASIC Act.

2 Whether an order restraining the exercise of voting or other rights in respect of and disposing of any interest in specified securities, made pursuant to section 73 of the ASIC Act, can be varied by ASIC pursuant to section 75 of the ASIC Act to allow for the disposal of the specified securities subject to a condition that the proceeds of sale of the specified securities be held in trust by ASIC.

3 By reason of the matters set out in the Statement of Agreed Facts and the documents contained in the Bundle of Agreed Documents or any of them, is the Applicant estopped from:

3.1 challenging the validity of any or all of the orders made by ASIC as set out in paragraphs 8, 16, 17, 19 and 21 of the Statement of Agreed Facts ("the Orders"); and/or

3.2 obtaining, as a result of a successful challenge to the validity of any or all of the Orders, the proceeds of sale of the specified securities held in trust.'

17 The parties prepared a Statement of Agreed Facts which has formed the basis of the above recitation of the facts. The material in paragraphs 8,16,17 19 and 21 of that Statement appears in slightly greater detail in the above account of the facts. Those paragraphs relate to the role of Centurion in connection with the making of the varying orders including the condition permitting the sale of shares but only on condition that the proceeds of sale would be lodged with ASIC.

The Statutory Context

18 Part 3 of the ASIC Law relates to `Investigations and Information Gathering'. The general power to investigate is contained in the first section in the first Division of the Part, s 13. Subsection 13(1) should be set out:

'13 General powers of investigation

(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 or managed investment scheme or to securities or futures contracts.'

Subsequent Divisions confer on ASIC, among other things, powers to examine persons, to require the production of books and records, to procure warrants, to search and seize books and records, to conduct hearings and to institute criminal and civil proceedings.

19 Division 8 of Part 3 deals with ASIC's `powers where non-compliance with Part'. The trigger for the exercise of the powers is found in s 71:

'71 Orders by Commission

This Division applies where, in the Commission's opinion, information about:

(a) affairs of a body corporate; or

(b) securities; or

(c) futures contracts;

needs to be found out for the purposes of the exercise of any of the Commission's powers under this Part but cannot be found out because a person has failed to comply with a requirement made under this Part.'

20 Where ASIC has formed an opinion under s 71 the powers under s 73 and

s 75 follow:

'73 Orders in relation to securities generally

If paragraph 71(b) applies, the Commission may make one or more of the following:

(a) an order restraining a specified person from disposing of any interest in specified securities;

(b) an order restraining a specified person from acquiring any interest in specified securities;

(c) an order restraining the exercise of voting or other rights attached to specified securities;

(d) an order directing the holder of securities in respect of which an order under this section is in force to give written notice of that order to any person whom the holder knows to be entitled to exercise a right to vote attached to the securities;

(e) an order directing a body corporate not to pay, except in the course of winding up, a sum due from the body in respect of specified securities;

(f) an order directing a body corporate not to register the transfer or transmission of specified securities;

(g) an order directing a body corporate not to issue to a person who holds shares in the body shares that the body proposed to issue to the person:

(i) because the person holds such shares; or

(ii) pursuant to an offer or invitation made or issued to the person because the person holds such shares.'

'75 Orders under this Division

(1) The Commission may make an order varying or revoking an order in force under this Division.

(2) An order under this Division shall be made by notice published in the Gazette.

(3) Where an order is made under this Division (other than subsection (1)), the Commission shall cause to be given to the person to whom the order is directed:

(a) a copy of the order; and

(b) a copy of each order varying or revoking it.

(4) Where an order under this Division relates to securities, the Commission shall cause:

(a) a copy of the order; and

(b) a copy of each order varying or revoking it;

to be given to:

(c) in any case - the person who issued or made available, or who will issue or make available, the securities; or

(d) if the securities are rights or options - the person against whom the right or option is, or would be enforceable.

(5) A person shall comply with an order in force under this Division.

Penalty: 25 penalty units or imprisonment for 6 months, or both.'

The Three Preliminary Issues

21 We turn to the three issues that have been argued before us.

22 The first two issues involve the construction of s 73 and s 75 of the Act. We must determine what powers are conferred by those sections by reference to the meaning of the words used in the sections. In connection with both issues, in the first by Centurion and in the second by ASIC, we have been urged to adopt constructions of the legislation which do not accord with the literal meaning of the words used. Section 73 confers power on ASIC to restrain `a specified person' without apparent qualification; yet Centurion urges upon us a construction which would limit the object of the power to the person whose conduct has attracted the provisions of s 71, namely the `....person [who] has failed to comply with a requirement made under [Part 3]'. Section 75 confers power on ASIC to `make an order varying or revoking an order in force under [Division 3]'. Such an order may be an order under s 73(a) `restraining a specified person from disposing of any interest in specified securities'. The combined sections confer power on ASIC to vary or revoke an order restraining disposition; yet ASIC urges upon us a construction which would authorise a varying order which permits disposition but which imposes terms relating to the securing of the proceeds of sale.

23 Although the powers conferred by Part 3 are concerned with `investigation and information-gathering' that process is not an end in itself. Section 13 shows that investigations are concerned principally with discovering suspected contraventions. Where evidence of contraventions is assembled ASIC is empowered to commence prosecutions and to cause civil proceedings to be commenced in the name of persons entitled to sue for damages or the recovery of property where such proceedings are in the public interest (s 50 of the ASIC Law) or to make other applications of the type contemplated by ss 1324, 1325, and 1325A of the Corporations Law.

24 The agreed facts and the s 73 orders show that the original object of the present ASIC investigation was to determine whether a person or persons had a relevant interest in voting shares in WSM (s 605 and s 30 to s 45 (Part 1.2, Division 5) of the Corporations Law) and therefore was entitled to (s 609) more than the prescribed percentage in contravention of s 615 of the Corporations Law. If such a contravention was established ASIC, WSM, members of WSM, and the person from whom the shares were acquired, would be entitled to apply to the Court for remedial orders and ancillary orders (s 737). Remedial orders are defined in s 613:

`613 Remedial orders

(1) A reference to a remedial order, in relation to the Court, is a reference to any one or more of the following orders:

(a) an order restraining the exercise of any voting or other rights attached to shares;

(b) an order directing a body corporate not to make payment, or to defer making payment, of any amount or amounts due from the body corporate in respect of shares;

(c) an order restraining the acquisition or disposal of, or of an interest in, shares;

(d) an order directing the disposal of, or of an interest in, shares;

(e) an order vesting in the Commission shares or an interest in shares;

(f) an order directing a body corporate not to register the transfer or transmission of shares;

(g) an order that an exercise of the voting or other rights attached to shares be disregarded;

(h) an order cancelling an agreement or offer relating to a takeover scheme or takeover announcement, or a proposed takeover scheme or proposed takeover announcement, or any other agreement or offer in connection with the acquisition of shares;

(j) an order declaring an agreement or offer relating to a takeover scheme or takeover announcement, or proposed takeover scheme or proposed takeover announcement, or any other agreement or offer in connection with the acquisition of shares to be voidable.'

25 The s 73 orders (although not the agreed facts) also refer to potential false, misleading and deceptive conduct, statements and information. In all the circumstances we take these to be ancillary matters to ASIC's principal suspicion that there may have been a contravention of s 615 of the Corporations Law.

26 ASIC has power to, and in this case did, follow a number of lines of investigation once its power has been triggered by the forming of an opinion under s 13 of the ASIC Law. It sought production of documents from, and conducted compulsory examinations of, many persons other than persons suspected of being involved in contraventions. It follows that those persons came under obligations to comply with requirements made under Part 3 of the ASIC Act. There must be many occasions when persons obliged to comply with requirements arising under Part 3 are not the persons whose conduct originally gave rise to ASIC forming its opinion under subs 13(1). These persons could include, for example, brokers. There are plainly persons who may fail to comply with the Part, where securities are held contrary to the Part, although they had no involvement with the contravention.

27 Securities acquired in contravention of s 615 may be held by persons neither involved in nor even aware of, the contravention. This may well be the case when shares are held by a trustee. Plainly, securities acquired in breach of the Corporations Law may be registered in the names of holders who are innocent of any contravention.

28 There may even be cases where the holder of the shares is the person whose conduct has lead to the investigation but who has not failed to comply with a requirement of Part 3 although a third party with information which would disclose the truth, has.

29 It follows that the power to act under s 73 may be triggered by a person having no interest in the securities and that the registered holder of securities may never become the subject of a requirement to comply with Part 3. In both situations it may be reasonable for an order to be made preventing, for example, the exercise of voting or other rights attached to the securities. The withholding of information may preclude ASIC from concluding an investigation which would lead to Court orders relating to the shares, whoever was withholding the information.

Issue 1: Who may be an object of a Restraining Order under s 73.

30 With this background it is necessary to turn to the words of s 71 and s 73 to see if they support a limitation by which the `specified person' in s 73 must be the same as the `person [who] has failed to comply' in s 71.

31 It is submitted on behalf of Centurion that the word `specified' appears in s 73 because the legislature required any person to be subjected to an order made under s 73 to be identified in the order. However, the person must still be a person falling within s 71. Support for the proposition that only persons who had failed to comply could be made the object of orders under s 73 was sought from s 70 in Div 7 dealing with court orders for compliance, which can only be made against persons who have failed to comply. The meaning contended for by Centurion was said to be aided by a number of canons of construction and by reference to the provisions of Pt 1.2 Div 8 of the Corporations Law relating to the construction of statutes, which provisions are substituted for the provisions of the Acts Interpretation Act 1901 (s 5 of the ASIC Law).

32 We are unable to accept the submissions put on behalf of Centurion. The requirement in s 73 for a person to be specified shows that the legislature recognised that the object of an order under s 73 might be selected from a group of persons. It is inconsistent with there being only one candidate, namely the person who has failed to comply. Centurion seeks partly to explain this by accepting that where the noncomplying person is a corporation its officers, as well as the company, might be subject to an order. Apart from containing the seeds of recognition of the invalidity of Centurion's argument, this submission does not adequately explain the presence of the word `specified', even when Centurion's other submissions are taken into account. The argument based on s 70 is also unpersuasive. Plainly, where compliance is to be ordered, the order must be made against the person who failed to comply.

33 The ordinary meaning of the words `specified person' in s 73, appearing in their context described above, is that the order can be made against third parties, even innocent third parties, who fall within the reach of the section However, the orders which may be made are not unlimited. Orders may only be made against a person with a connection to the investigation because the order will be limited to securities in some way related to the subject being investigated.

34 There are parts of the legislation which support the above construction. In particular, we point to the presence of the phrase `specified securities of the body corporate referred to in [paragraph 71(a)]' in s 72 which authorises similar orders to those provided for in s 73. The legislature has accordingly expressly limited a power similar to the s 73 power by reference to a subject `referred to' in s 71 in at least one place where a limitation by reference to s 71 was intended.

35 In our opinion the words of s 73 alone, and also in their context, compel the conclusion that orders under the section can be made against persons who have not failed to comply with a requirement made under Part 3 of the ASIC Law although power to make such orders will not arise unless some person has failed to comply.

36 The first issue must be decided against Centurion. We note, however, that the second issue must be determined in the context that s 73 gives a powerful tool, normally only exercised judicially, to an arm of the executive which can exercise it against an innocent party. Such a power is not likely to be widely construed.

Issue 2: The Width of the Power under s 73 and s 75

37 There are two aspects of the second issue. The first is whether the power to vary permits a widening of the original order to a point at which it would have been outside power if originally made in the varied form. The second aspect is whether the power to restrain the disposition of securities in s 73 is itself wide enough to authorise the making of an order by which the proceeds of a sale are to be held upon trust.

The Power to Vary: s 75

38 So far as the first aspect is concerned, it has been urged upon us by ASIC that the power to vary must permit a varied order wider than would be authorised by s 73 alone because otherwise the power to vary would be otiose. The same result could be achieved by revoking the original order and replacing it with a new order. We do not agree that the power to vary would otherwise be otiose. There is much to be said for the view that if what is proposed is a variation in substance, this should be reflected in form even if the same result could be achieved by a fresh order. The device of revoking an order and replacing it may leave a moment in time when no order exists. Rights of third parties might gain priority. Issues as to the date on which the order was made might also give rise to problems. Whether or not such problems would arise in a practical sense, we consider their potentiality provides a substantial basis for the creation of a power to vary to accompany the power to revoke. In our experience powers to `vary or revoke' are regularly conferred as alternatives without expanding the original power.

39 The real reason, however, why the argument put by ASIC cannot be sustained is that any order varied under s 75 will remain an order under s 73. Such an order could not be wider than permitted by the section authorising the original order. The stream cannot rise higher than its source. Were it otherwise, an order made one day could be varied the following day to proscribe conduct that could never have been proscribed the day before. That cannot be the effect of s 75. We note that no limit on the power conferred by the varying power in s 75 has been posited and no basis for determining any limitation suggested. The width of the power in the first place, exercisable non-curially against innocent third parties, militates against any construction such as that contended for by ASIC. We have no doubt that the argument seeking to uphold the varying orders as being authorised merely by the width of the power to vary must fail.

The Underlying Power: Section 73

40 The question which then arises, and which is the most difficult question of construction before us, is what is the extent of the power conferred by s 73? If the power originally extended to the imposition of an obligation to deposit the proceeds of a disposition with ASIC to be held on trust, we have no doubt that the same result could be achieved by a variation of an original order.

41 Since the power conferred by the section is a power to restrain disposition, any order which imposes obligations relating to the proceeds of a disposition would seem, on first consideration, to be outside a power to restrain the disposition. However, permitting a sale on condition might be justified as a limited exercise of the power to restrain. If the repository of the power can restrain a disposition it may be able to do something falling short of a complete restraint. For example, we see no reason why an order under s 73(a) could not be limited to particular transferees or particular shares or require sale in a particular manner. However, any such limited exercise of the power would not involve any attempted exercise of power operating after disposition.

42 It has been argued on behalf of the respondent that the word `restraining' in s 73 should be construed to permit the control of an activity without actually preventing it. The judgment of Latham CJ in Swan Hill Corporation v Bradbury (1937) 56 CLR 746 at 753 (`Swan Hill') is relied upon. The respondent relies upon the judgment of Dixon J in the same case (at 762):

`...[T]o restrain an activity or course of conduct usually means something less than its entire prohibition. To restrain a man from a course of conduct is to stop his pursuit of it.'

We begin by noting that Swan Hill involved issues relating to Local Council by-laws `regulating and restraining the erection and construction of buildings'. Accordingly, the word `restrain' was there used in a context entirely different to the present. Its presence in the phrase `regulate and restrain' seriously affects the assistance which observations relating to its meaning in that case can have. However, as we have said, we can accept that restraint can include control of the carrying out of an activity. In the present case that might involve restrictions as to the manner of sale, for example, that it be by auction. Where we have difficulty, however, is in accepting a construction of the word which permits a disposition, the very thing which Dixon J says a restraint is calculated to `stop', and imposes an obligation upon the person subject to the restraint which only has effect after the disposition has been completed. We have difficulty in seeing how the imposition of an obligation to carry out a positive act, namely the deposit of proceeds of sale on trust can be supported by a power to restrain a disposition which has not only been permitted, but has also taken place.

43 At this point we should note that by being asked to consider preliminary questions of law, divorced from the facts, we are being asked to undertake a difficult exercise. There is a fine line between determining the outside limits of a power and determining the limits within which the power should be exercised in a particular case. For Centurion to succeed on the preliminary issues we must be satisfied that no fact situation could arise which would permit the authorisation of a sale on condition. It will not be sufficient to say that it would be a wrong exercise of the power. This is because we do not know what are the full circumstances of the present matter.

44 The outside limit which we must find is the limit of the purposes recognised by the legislation, or, in other words, the extent of the purposes within the scope and purpose of the legislation. We must determine whether orders such as those under consideration could ever be made under s 73 rather than whether the present orders should have been made.

45 It was suggested to us that the scope and purpose of s 73 might accommodate the use of the section as a means of procuring compliance. We cannot accept this. The Act provides for court orders to compel compliance (s 70). In the absence of any express reference to compelling compliance in s 72 to s 74 we do not think that compelling compliance could be within the scope and purpose of s 73. This does not, of course, deny that compliance might sometimes be an incidental consequence of the making of an order under s 73. However, we think that the issuing of orders restraining conduct must have the usual purpose of preserving the subject matter of proceedings, or, in this case, an investigation, or preserving the status quo pending the completion of the investigation. The trigger for the exercise of the powers might be noncompliance, but the powers which arise are not, we think, powers which have as their object the securing of compliance but rather powers which are calculated to preserve assets or the status quo pending completion of investigations or proceedings. We note that nothing in s 72 to s 74 suggests that the powers are only to be exercised on a limited or interim basis but the context suggests that this must be so.

46 A significant question in the present case is whether any circumstance could exist in which the proceeds of sale of securities could be forfeited or become the property of ASIC, or someone else, in consequence of the investigation.

47 A breach of s 615 of the Corporations Law can lead, by s 737 and s 613, to the vesting in ASIC of an interest in shares. Such a result would be rare but we cannot say that it might not occur here. However, there is no power to attach proceeds of sales of shares; only a power to vest shares themselves (s 613). It is unlikely that such a power is part of a power to vest shares. We do not think that the possibility that an investigation might uncover facts which attract the provisions of legislation such as proceeds of crime legislation, which could lead to forfeiture of the proceeds of the sales of shares, could enliven a power under s 73. Providing remedies against criminal acts not associated with breaches of the Corporations Law is outside the scope and purpose of the Corporations Law (see s 13 of the ASIC Law). We add, in fairness, that there is no suggestion in the present case that proceeds of crime legislation might be relevant.

48 However, the above analysis does not conclude the matter. Section 50 of the ASIC Law authorises ASIC, in appropriate circumstances, to commence civil proceedings for damages or recovery of property. Aiding the effective completion of such proceedings must be within the scope and purpose of the Act. Preserving funds to satisfy such a claim must also be within the scope and purpose of the Act. There accordingly is a legislative purpose which could support orders of the kind we are presently considering. If the legislation permits orders allowing conditional disposition it cannot be said that no circumstances could arise in which such orders could be made in this matter.

An Alternative View Not Solely Reliant on s 73 and s 75

49 Having determined that a power to require proceeds of a disposition to be preserved would be within the scope and purpose of the ASIC Law we must now consider whether the actual words of s 73 are wide enough to confer the power. Plainly they do not do so literally. They merely confer a power to restrain disposition.

50 A power to restrain disposition or sale is a power to interfere with the acts of others. The body with the power is not the primary actor. Whether or not there is a sale is entirely a matter for the person having the power of sale. A power to restrain sale is accordingly a power to interfere with other parties' actions. As we have shown, the power to restrain can be limited. It can prohibit sales to particular purchasers. It can confine its restraint to particular shares. It can control the manner of sale. However, such limitations are not conditions operating after sale. They are limitations or controls on the process. They can be incorporated in the restraint itself by an order not to dispose of identified securities or not to dispose of them to an identified person or by other than a specified manner.

51 Orders restraining conduct are generally made by courts in the form of injunctions. Injunctions may be mandatory or prohibitory. Mandatory injunctions compel conduct. Prohibitory injuctions prevent or restrain conduct. Injunctions may be permanent or interlocutory (interim). The usual purpose of interlocutory injunctions is to preserve the status quo pending a final determination of the issues in the proceedings in which the interlocutory injunction is made. Although orders under s 73 of the ASIC Law are not injunctions the words which the legislature has chosen are part of the discourse of injunctions. Reference to some of the principles relating to injunctions is helpful in understanding what ASIC may do pursuant to the powers conferred on it by s 73.

52 Orders made under s 73 of the ASIC Law have their closest parallel with interlocutory prohibitory injunctions granted by courts. A court might, for example, grant such an injunction to restrain a sale of property where the issue in the proceedings is ownership of the property.

53 It is often said that interlocutory injunctions may be granted on condition or that terms may be imposed as a condition of withholding an injunction (see Snell's Equity, 30th edn, ed. & rev. J McGhee, Sweet & Maxwell, London, 2000, at p. 735, at par [45-44]). Closer examination of the cases reveals that what is meant is usually that undertakings are given in return for a court declining to grant an injunction (Snell's Principles of Equity at p. 737, at par [45-48]). For example, interlocutory injunctions restraining asserted breaches of rights to intellectual property such as trade marks are often refused where the alleged infringer gives an undertaking to keep an account of dealings which will enable compensation to be assessed for any breach ultimately made out (e.g. Mitchell v Henry (1880) 15 Ch D 181). There have inevitably been occasions when injunctions restraining sale have been declined on the defendant undertaking to deposit the proceeds of sale to an agreed trust account. Of course such a course would only be followed if the sale did not destroy the subject matter of the litigation, or, in other words, where the plaintiffs claim could be satisfied by the proceeds of sale of property without transfer of the property itself. We note that we have already decided that the facts of the present matter, although not known to us, might result in the use of the proceeds of sale presently held in trust pursuant to the Corporations Law to satisfy claims arising out of the matter being investigated.

54 We must not proceed on the basis that an order under s 73 is to be equated with the grant of an interlocutory injunction. However, it is useful to analyse what occurs in legal terms when a court withholds an injunction in return for an undertaking. There is no exercise of the power to restrain, but rather a determination not to exercise the power in return for a voluntary undertaking. It seems as though, in fact, this is what both ASIC and Centurion were seeking to achieve in the present case. As we read the varied s73 orders they continued to restrain disposition. They did not require sale. They did not require the deposit of proceeds of sale. They merely identified voluntary conduct which would be accepted as a basis for withdrawing the s73 orders. Centurion readily agreed.

55 ASIC is a body corporate which may acquire, hold and dispose of property (s 8 of the ASIC Law). By subs 11(4) of the ASIC Law it `has power to do whatever is necessary for or in connection with, or reasonably incidental to, the performance of its functions.' It seems to us that it is arguable that holding the proceeds of sale lodged voluntarily by a party the subject of a s 73 order such as has occurred in the present case is within subs 11(4). The possibility that the present investigation may conclude with the funds now held by ASIC not being paid to Centurion shows that retaining the proceeds of sale by consent of all parties on agreed terms, in lieu of restraining sale is, at least, reasonably incidental to the performance of ASIC's functions.

56 We accordingly consider that it is arguable that the validity of the conduct of ASIC is not to be determined by the extent of the power conferred by s 73 and s 75 but rather by whether ASIC had power to hold funds on the trust specified here where they were voluntarily deposited with it on that basis in return for ASIC withdrawing a lawful restraint on disposition. It seems to us that such a proposition is arguable and the power might be found to exist. ASIC may be able to withhold the making of an order under s 73 of the ASIC Law restraining the sale of securities in return for an undertaking to lodge the proceeds of sale with ASIC to be held by ASIC pending the finalisation of the investigation which underpins the making of the order. However, this question has not been argued before us and it would be inappropriate to determine the matter now.

57 We cannot, however, find that either s73 or s 75 confers a power to require the proceeds of a disposition, which has not been restrained, to be deposited on trust with ASIC. Nor do we think that, properly understood, that is what happened here. So far as the power is concerned we cannot see that an express power to restrain sale can be construed as a power to impose obligations with respect to the proceeds of a disposition which has not been restrained. The first consideration identified above yields the correct construction.

Conclusion

58 The powers of this Tribunal to review the decisions of ASIC are limited. The Tribunal can review decisions to make orders under s 72, s 73 and s 74 of the ASIC Law, to make varying orders under subs 75(1) and to refuse to vary or revoke orders made under Part 3 (s 244). The present application is an application for review of a decision not to revoke the original orders or the varying orders. We have considered two arguments in support of Centurion's submission that we should revoke the orders.

59 The first argument was that orders could not be made against Centurion under s 73 because Centurion had not failed to comply with a requirement made under Part 3 of the ASIC Law. We have found that ASIC could make orders under s 73 where there was noncompliance by a person other than the person who was to be made subject to the s 73 orders. No other argument has presently been put to us why the original orders were not valid. Accordingly, we would answer `yes' to the first preliminary issue and would not revoke those orders although they appear no longer to have any effect. It follows that we will not set aside the varying orders on the first ground.

60 The second ground for revocation was confined to the varying orders. We have found that varying orders made under s 75 cannot go outside the power conferred by s 73. Accordingly, the validity of the varying orders is ultimately to be tested by whether they are authorised by s 73. Since s 73 authorises the making of orders restraining disposition it must follow that ASIC has a discretion to examine whether it will make orders under the section or not. We are of the opinion that it is arguable that ASIC may withhold or limit orders under s 73 in return for voluntary undertakings to deal in an agreed manner with the proceeds of sales of securities the sale of which would otherwise be restrained, including depositing them into a trust held by ASIC. To the extent that the varying orders are orders actually restraining sale under s 73, no argument so far presented shows that ASIC could not make them. To the extent that they withhold restraining orders in return for the deposit of proceeds of sale on trust, we consider that there are arguments supporting the validity of this practice. However, we will not so find, and hence cannot answer the second preliminary issue, without hearing further argument from the parties. We do, however, conclude that s 73 and s 75 do not confer power upon ASIC to impose obligations compelling proceeds of sale to be deposited on trust.

61 On the matters so far argued before us we cannot yet determine whether to affirm the decision under review, namely the decision not to revoke the varying orders.

Issue 3: Estoppel by Conduct

62 In case ASIC should fail on both issues 1 and 2 ASIC raised a third issue, namely, estoppel. Because of the way we have analysed the matters associated with issues 1 and 2 we have decided not to deal with the issue of estoppel. Since the estoppel issues are so bound up with an understanding of the legal position relating to conditional s 73 orders which we have not yet finally determined we think it inappropriate to address the question of estoppel, even in the alternative.

Result

63 At the beginning of the hearing of this matter we raised with counsel for both parties the possibility that the Tribunal might not be able to determine all the issues between the parties because it has only such powers as are expressly conferred upon it by statute. We raised the possibility that proceedings in the Federal Court of Australia might be necessary. We contemplated the possibility that a judge who was a member of both the Federal Court and this Tribunal might sit concurrently hearing matters in both the Court and the Tribunal. The parties sought an adjournment to consider these matters but ultimately no application was made and the matter proceeded as proposed.

64 The proper course for us is to relist the matter for directions at a time convenient to the parties. The matter can then be fixed for further hearing so that the remaining issues, including those associated with the facts of the case, can be heard and the matter finally determined in this Tribunal. We note, however, that the Tribunal's reasons may raise issues as to what further jurisdiction the Tribunal will have, given that its jurisdiction is confined to the matters in s 244 of the ASIC Law.

65 The matter will be listed for directions at a time to be arranged by the parties with the District Registrar in Perth.

I certify that the sixty-five (65) preceding paragraphs are a true copy of the reasons for the decision herein of:

Justice Garry Downes, President

Murray Allen, Member

Signed: .....................(sgd A Edington)............................

Associate

Dates of Hearing 11 and 12 December 2002

Date of Decision 10 February 2003

Counsel for Applicant Mr M Bennett and Ms J Hill

Solicitor for Applicant Bennett & Co

Counsel for Respondent Ms N Johnson, QC

Solicitor for Respondent Mr Benter for the Australian Securities and Investments Commission