Australia Security And Investment Commission Essay

Question:

Discuss about the Australia Security and Investment Commission.

Answer:

Introduction

The companies in Australia are required to follow the different provisions which are provided in the Corporations Act, 2001, which is an act of the commonwealth of Australia (Cassidy, 2006). Under this act, the officers and the directors of the company are provided certain responsibilities which have to be fulfilled properly in order for the person in question to be deemed to have discharged their duties in a proper manner, and also while exercising their powers (Latimer, 2012). Such responsibility has been imposed over the directors as they are the individuals who run the business of the company on behalf of the shareholders pursuant to section 198(1) of this act (Austlii, 2018).

Gore v ASIC [2017] FCAFC 13 is a good example of the possibility of corporate advisors, directors or officers of company being made responsible for breach of duties set out under the Corporations Act. This is particularly true when such individuals are deemed as accessory to such contraventions. This case was related to provisions covered under part 6D.2 of this act which relates to disclosure requirements (Austlii, 2017).

Background of this case

An appeal was made by Marina Gore against the order of the court. This appeal was based on imposition of injunction of 7.5 years based on section 1324 of this act. This led to Marina being restricted from indulging in any kind of business in the nation’s financial service industry. The court held that the provisions of the governing act had been contravened by Gore, particularly the first two subsections of section 727 of this act. This was because Gore had made offer of securities without the requisite disclosure documents, in addition to breach of section 1014H. Section 12DA of the Australian Securities and Investments Commission Act, 2001 had also been contravened in this case as per the court. This was owing to the indulgence of Marina in deceptive and the misleading conduct. A cross appeal was also made by the ASIC in this matter. This was due to inappropriateness of injunction stating of 7.5 years (Macredie, 2017).

The issue of this case was related to the possible breach of section 727 of this act for the reasons of Gore being indulged in accessorial liability.

Duties breached

Rules

Under section 79 of this act, the provisions for accessorial liability are given. This section provides that a person has to be made liable in a personal manner for contravening the sections of this legislation as being an accessory by another person, where the same is proved to the satisfaction of court that the initial person took part in contraventions of second person. In order for being a part of the contravention, the person needs to be involved in conspiring with the other person, and also needs to be indulged in inducing, counselling, abetting, procuring or aiding in either indirect or direct manner, and in a manner which was in the knowledge of the concerned party (Australian Government, 2018).

Section 727 of the Corporations Act provides that there is a need for properly lodging the disclosure document in cases of securities being offered. Section 727(1) particularly states that an offer should not be made and also application should not be distributed for offering securities. This restricted is put till such period where the disclosure documents are lodged with ASIC. These disclosure documents have to be as per provisions of Part 6D.2. Section 727(2) provides that there is a need to include offer form in these documents. If this cannot be done, the offer form has to be attached to such documents (WIPO, 2015). Under this section, the offering of securities is restricted, along with restrictions on distribution of the application form for making an offer of securities, which are needed as per the disclosers made to the investors based on Part 6D.2, till the time:

  • Prospectus used for an offer:
    • Offer or the form needs to cover the prospectus, or has to be accompanied by the copy of such prospectus.
  • Prospectus and profile statement used for an offer:
    • Offer or the form needs to cover the prospectus and profile statement, or has to be accompanied by the copy of such prospectus or profile statement.
  • Offer information statement used for an offer:
    • Offer or the form needs to cover the prospectus, or has to be accompanied by the copy of such offer information statement.

In this matter, Yorke v Lucas [1985] HCA 65 was deemed as an important reference point. The quoted case presented that during the civil proceedings, the essential elements of the particular breach had to be shown. This is to show the contravention had taken place. This was important in context of holding a person as accessory of breach. Merely showing that the person had the knowledge about the facts could not be deemed as a breach (Haarsma Lawyers, 2009). Furthermore, the contravention needs to require an intentional participation and intent on the basis of knowledge of these elements (Jade, 2018a).


Another precedent holding significance here was Giorgianni v The Queen [1985] HCA 29. This case presented lesions for criminal law requirements in context of holding a person as accessory. Based on this case, there was a need to show intent, instead of showing that the person ordered the acts to be done. This matter was related to offence attracting strict liability under the criminal law. And the culpable driving of this case was related to defective brakes (Jade, 2018b). The statue provided that the person had to aid, abate, counsel or procure in a different person who drove in a dangerous manner as a result of which grievous bodily harm was caused or death was caused. In such cases, the initial person had to be convicted of a specific offence which was related to culpable driving. The plaintiff lacked the knowledge of the defect in braking system. Yet, the party appealing in this matter was convicted (High Court of Australia, 2018).

The third precent quoted in this matter was Johnson v Youden [1950] 1 KB 544. In Johnson, the court had held that in order to hold an individual as an accessory for any offence, the individual needs to know regarding the essential elements on which the offence had been formed. In lay man’s terms, there is no need of the person holding the knowledge of the committing of offence. This is due to the fact that the person could lack the knowledge of the offence being actually committed. Also, citing ignorance of law is not a valid defence (Davies, 2015).

A number of cases were cited in this decision and the next precent was ASIC v Adler [2002] NSWSC 171. The reason for citing this case was for knowledge to be “actual” instead of being constructive. The company and the defendant were deemed as accessory to breach of director duties. They were held liable due to applicability of section 79 of Corporations Act. And they were accessory of Raymond Williams (Justis, 2018). This case had Williams passing on the instructions. And the transactions were undertaken here on Adler’s initiatives. Thus, it was stated by the court that both Williams and Adler had violated these provisions in a knowing manner. Further, it could not be denied by them that they were aware of the factual elements resulting in contravention, and this was true even when both Williams and Adler had considered that the transaction had been undertaken at arm’s length principle (Austlii, 2002).

Application

For establishing the accessorial liability there is a need to show that the contravention which has been alleged for the securities had been offered or an application had been distributed by Gore for the securities offer. Also, there is a need to prove that the disclosures under part 6D.2 were required to be made to the investors. The last requirement is to show that no information statement, profile statement or prospectus had been submitted to ASIC. It was held that securities in this matter had been offered. Also, there was a distribution of application. Based on the situation, there was a need for lodging the disclosure document and this situation had to be this offer’s contents. Gore had clear knowledge of all this and yet failed in filing the disclosure document with ASIC (Jade, 2017).

This case saw extensive consideration being given to the knowledge of Gore in being a part of the contraventions. The viewpoint adopted here was based on the precedents. The precedent was particularly related to failure in holding the elements of section 727(1) being present. It had been stated earlier that the only thing which had to be shown by the ASIC was the defendants had the requisite knowledge in the matter of two elements, and that they did not have to show that they were aware of disclosers based on the sections of Corporations Act, as had been elucidated in the previous segment. In this case, reference had to be made to the quoted cases where it was not required to show before that the court that the alleged accessory held the knowledge regarding the provisions in statute, which could have resulted in the conduct of the leading breaching party being unlawful; and that the only requirement was to establish the awareness of the accessory regarding the related matter associated with the unlawfulness. In this case, the relevant information was the knowledge of facts regarding the need of disclosures, instead of the requirement being placed through the governing legislation (Jade, 2017).

As highlighted earlier, provisions of Criminal Code were involved here. However, these were not applied in this case. The reason for the same was the lack of these provisions being raised. Without doing so, the court could not consider these. Even though the matter was related to criminal offence, it never went to the court for holding the same. Court had the option of upholding the finding of first instance despite the failure in applicability of Criminal Code, and even for determining the matter based on the law, for the same to be remitted. In the matter of accessorial liability, it could be shown to be present in this case in a clear manner. This is due to the knowledge of the offer’s contents which were a proof of requirements of such disclosures. There was a clear presence of provisions of Part 6D.2 in this case since the ignorance of law could not be deemed as a valid excuse (Jade, 2017).

Conclusion and Court’s Decision

This case saw the court considering that ASIC had to show the presence of fault elements of criminal court for getting the civil remedies for the violations of provisions of the governing act, due to the securities having being offered without a prospectors. This had been undertaken through the appeal and cross appeal of this matter (Mondo Visione, 2017).

The criminal code had not been applied in this case by the court since the same had not been applied in the initial case, and this happened even when the fault elements could be regarded as the particular offence. After taking into consideration all of these issues, it was concluded by the court that the decision which had been given by the initial judge had been right for the contravention of section 727 by Gore. This led to the grounds covered under the modified notice of appeal being dismissed by the court. Thus, Gore’s appeal had been rejected along with the rejection of cross appeal made by ASIC. It was held by the court that the primary judge had properly reflected over the culpability of the issue; and the breaches of Corporation Act by Gore had just been a part of the grand scheme. So, the appealing party had to pay the cost of cross appeal, and vice versa (Austlii, 2017).

References

Austlii. (2002). ASIC v Adler and 4 Ors [2002] NSWSC 483 (30 May 2002). Retrieved from:

Austlii. (2017). Gore v Australian Securities and Investments Commission [2017] FCAFC 13 (13 February 2017). Retrieved from:

Austlii. (2018). Corporations Act 2001. Retrieved from:

Australian Government. (2018) Corporations Act 2001. Retrieved from:

Cassidy, J. (2006). Concise Corporations Law. 5th ed. NSW: The Federation Press.

Davies, P.S. (2015). Accessory Liability. Oxford: Hart Publishing.

Haarsma Lawyers. (2009). Case Study - Misleading and Deceptive Conduct - Yorke v Lucas - Oct 6, 2009. Retrieved from:

High Court of Australia. (2018). Giorgianni v The Queen. Retrieved from:

Jade. (2017). Gore v Australian Securities and Investments Commission [2017] FCAFC 13. Retrieved from:

Jade. (2018a). Yorke v Lucas. Retrieved from:

Jade. (2018b). Giorgianni v R. Retrieved from:

Justis. (2018). ASIC v Adler & 4 Ors 2002. Retrieved from:

Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia Limited.

Macredie, R. (2017). Gore v Australian Securities and Investments Commission [2017] FCAFC 13. Retrieved from:

Mondo Visione. (2017). ASIC: Application Of Criminal Code In Civil Proceedings Under Corporations. Retrieved from:

WIPO. (2015). Corporations Act 2001. Retrieved from:

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