Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd & Ors [1999] QSC 387

SUPREME COURT OF QUEENSLAND CITATION: PARTIES: Australian Securities and Investments Commission v Enterprise Solutions 2000 Ply Ltd & Ors [1999] QSC 387 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION (Applicant) ENTERPRISE SOLUTIONS 2000 PTY LTD ACN 085 105 540 (First Respondent) HONG KONG MULTIS PTY LTD ACN 085712063 (Second Respondent) INVESTMENT SOLUTIONS 2000 PTY LTD ACN 079 481 066 (Third Respondent) TROY ADAM HUNT . (Fourth Respondent) ADRIAN LESLIE REBBECK (Fifth Respondent) WALTER JOHN DE VIR (Sixth Respondent) IS 2000 PTY LTD ACN 083 196 070 (Seventh Respondent) FILE NO: S6802/99 DIVISION: Trial Division DELIVERED ON: 10 December 1999 DELIVERED AT: Brisbane HEARING DATE: 30 November 1999 JUDGE: Douglas J ORDER: Declaration that the schemes carried on by the respondents are managed investment schemes within the meaning of s 9 of the Corporations Law. CATCHWORDS: STATUTES ACTS OF PARLIAMENT INTERPRETATION CONSIDERATION OF EXTRINSIC MATERIAL - LEGISLATIVE HISTORY OF ACT - Chapter 5C of the Corporations Law - whether a betting scheme is a managed investment scheme as defined in s 9 - meaning of "scheme", "to be pooled" and "common enterprise". -- 1 of 16 -- COUNSEL: SOLICITORS: 2 The Corporations Law, Chapter 5C, s 9. Australian Softwood Forest Pty Ltd & Drs v Attorney- Generalfor the State of New South Wales; Ex rei Corporate Affairs Commission (1982) 148 CLR 121, applied. DKLR Holding Co (No 2) Pty Ltd v The Commissioner of Stamp Duty (NSW) (1981-1982) 149 CLR 431, considered Ms E M O'Reilly SC with her Mr C Wilson for the applicant Mr F L Harrison QC with him Mr P Bickford for the respondent Australian Securities and Investments Commission for the applicant Rogers Matheson Clark for the respondent [1] DOUGLAS J: This is an application by Australian Securities and Investments Commission (ASIC). It concerns whether or not certain schemes set out in an agreed statement of facts are managed investment schemes within the meaning of s 9 of the Corporations Law. The particular application before me is effectively the trial of the action. [2] The Statement of Agreed Facts is as follows: Background There are four corporate respondents in these proceedings: (a) enterprise Solutions 2000 Pty Ltd ACN 085 105 540 ("Enterprise Solutions"), the First Respondent; (b) Hong Kong Multis Pty Ltd ACN 085712063 the Second Respondent; (c) Investment Solutions 2000 Pty Ltd ACN 079 481 066 ("Investment Solutions"), the Third Respondent; (d) IS 2000 Pty Ltd ACN 083 196070 ("IS 2000"), the Seventh Respondent. IS 2000 was not originally a respondent in the proceedings, but will be joined by consent order at the hearing of this application. . The three individual respondents were directors of these companies. Currently the sole director of each company is Adrian Leslie Rebbeck ("Reb beck"), the Fifth Respondent. A current ASIC search for each of these companies is shown as Annexure A. Although shown as a director in the ASIC current search, Walter John Devir, the Sixth Respondent, resigned as a director of Investment Solutions on 21 July 1999. -- 2 of 16 -- ( " 3 None of these companies or its directors: (a) has held any ASIC licences; (b) issued a prospectus pursuant to Part 7.12 ofthe Corporations Law, (c) obtained ASIC registration for a managed investment scheme In accordance with Part 5C.1 of the Corporations Law. The applicants in this application are the First, Second, Third, Fifth and Seventh Respondents. ASIC, and the Fourth and Sixth Respondents, are the respondents to this application. Agency Agreements Agency agreements were entered into between IS 2000 or HKM, defined therein as "the Agent", and individuals each defined therein and hereafter referred to as "the Investor". There are currently 501 Investors of whom 462 are active in that betting is carried out on their behalf Of these active Investors, approximately 40% have agreements with IS2000 and approximately 60% have agreements with HKM. A few Investors have agreements with both IS 2000 and HKM. The IS 2000 and HKM agency agreements are essentially in the same terms. See Annexure B for examples ofthe agreements. There are no written agreements between: (a) either or both ofHKM and IS2000 and Investment Solutions or Enterprise Solutions concerning the bank accounts referred to in paragraphs 11, 12 and 13; (b) the Investors and Investment Solutions or Enterprise Solutions concerning the bank accounts referred to in paragraphs I 1, 12 and 13; (c) Rebbeck and Investment Solutions or Enterprise Solutions concerning the bank accounts referred to in paragraphs 11, 12 and 13; either or both ofHKM and lS2000 and Rebbeck. Dealings with moneys paid pursuant to the Agency Agreements Amounts received from Investors under the agency agreements are paid into one of the following accounts: (a) account maintained by Investment Solutions with ANZ Bank, BSB No. 014-518, Account No. 3532-68029 and entitled "Investment Solutions 2000 P/L Trust Account", (mainly for Investors who have IS 2000 agency agreements); -- 3 of 16 -- ( ( \ 4 (b) account maintained by Enterprise Solutions with ANZ Bank, BSB No. 0 14-518 Account No. 2534-84875 and entitled "Enterprise Solutions 2000 P/L Hong Kong Trust", (mainly for Investors who have HKM agency agreements); although some moneys have been paid into each account in relation to both IS 2000 agreements and HKM agreements. These payments are made by Investors by cheques payable to Investment Solutions or Enterprise Solutions or by direct deposit to these bank accounts. Payments are made from these accounts by Investment Solutions and Enterprise Solutions in order to meet: (a) (b) (c) the management fees payable under the agency agreements with IS 2000 andHKM; the placing of bets with betting agencies as described in the definition of "Investment" contained in clause 1.1 of the agency agreements; the need to maintain credit balances with betting agencies, that is, bookmakers and totalisators (these accounts with betting agencies are held in Rebbeck's name they cannot be held in a company's name, and must be maintained in credit- to maintain these credit balances, funds are also transferred from one betting agency account to another, depending on the state of the various betting agency accounts at the time, that is, where a large credit had built up in one account, funds would be transferred at Rebbeck's direction from that account to another betting agency account which needed topping up for betting purposes); (d) Investor requests for withdrawals by way of distribution of profit (if any) to Investors in accordance with clause 6.2(c) of the agency agreements, that is, such distribution within 7 days from the last Business Day (as defined) monthly. Investor Accounts Each Investor has an individual account with the agent in which the transactions effected on behalf of that Investor are recorded. See Annexure C for typical examples. Each Investor's account is maintained on computer. The Investor has a password which gives the Investor secure, 24 hour access to the Investor's account on the web. The account shows the: (a) type of programme (Trojan or Hong Kong Multis - more particularly described below under "Betting Programmes"); (b) management fees paid and/or owing; -- 4 of 16 -- ( 5 (c) withdrawals and deposits to the account; (d) net result for each race day; (e) net position in the Investor's account at the end of each month; (f) "standing orders" given by the Investor to the agent, which relate to the instructions as to the remitting of Investor's profit (if any) at the end of each month to a nominated account. Betting Programmes There are two betting- software programmes, known as "Trojan" and "Hong Kong Multis". Trojan was developed first. Apart from the standard programme, Trojan had several different versions, which are referred to as New South Wales Exotics, Victorian Exotics, Wholesale, Silver and Flexi. New South Wales Exotics and Victorian Exotics were used only for betting on New South Wales and, Victorian races respectively. They are no longer used. Wholesale, Silver and Flexi have different management fee structures and are still used. Trojan is operated by IS 2000. Trojan provides a system for the placing of bets on thoroughbred horse races in Sydney, Melbourne and Brisbane. The bets are placed with bookmakers, betting shops and totalisators around Australia and in Vanuatu, in Rebbeck's name. The Trojan programme ceased to be offered to new Investors in November 1998. Hong Kong Multis is operated by HKM. Hong Kong Multis provides a system for the placing of bets on thoroughbred horse races in Hong Kong, with the totalisator in Hong Kong, in Rebbeck's name. This programme is more recent and is gradually supplanting the Trojan programme because of the larger size betting pools available in Hong Kong. The Trojan programme operates only on win and/or place bets and determines: (a) subject to an overriding discretion in Rebbeck referred to below, the races on which to bet- (i) the programme scans each race at race meetings III Sydney, Melbourne and Brisbane on Saturday; (ii) certain races are eliminated by the programme, for instance, if the race is over a certain distance or has a limited field or is a hurdle or steeple race or is for 2 year olds; (iii) the overriding discretion in Rebbeck referred to is a decision by Rebbeck, prior to the placement of a bet, whether or not to bet on a race selected by the programme, having regard to: changes in weather or track conditions, e.g. wet track -- 5 of 16 -- ( \ " 6 track conditions not previously known or wrongly assessed, e.g. barrier conditions late scratchings change of jockey changes in betting odds from those assessed by the programme; (b) the horses to back in each race: (i) the programme has a history of each horse showing breeding, performances, current form etc; (ii) a minimum of 3 horses are backed in each race, up to a maximum of 10 horses, as selected by the programme; (iii) certain horses are eliminated by the programme for instance, if the horse has no disclosed form, bad barrier draw or is an odds on favourite, (iv) for those horses not eliminated, the programme then identifies each ofthe horses which have an "arbitrage margin"; (v) the "arbitrage margin" results from a comparison between the bookmaker's on course price, which is a contract price, and the best price quoted on the totalisator or vice versa; (vi) the totalisator price is not a contract price, but an approximate price which fluctuates during the betting period before a race depending at the time on the size of the betting pool; the amount actually paid on the totalisator is not determined until after the race when the final dividend is declared; (vii) where, in the period just before the close of betting for the race in question, the arbitrage margin is favourable in comparison with the bookmaker or totalisator price, then, unless Rebbeck has exercised his discretion not to bet on that race, that horse becomes a selection and a bet is placed on that horse, with either the bookmaker or the totalisator, whichever is showing the higher price; (viii) examples of horses selected for each of the 9 available races on 1 January 1999 are set out in Annexure D; for instance, on Race 2 at Flemington, the programme selected horse numbers 1, 3, 6, 11 and 13 on which to bet and determined the number of units to be bet on each horse for a total of 31 units; also shown is the bookmaker's price (BM) and the final dividend paid by the relevant state totalisator (TAB), whether the bet was placed with a bookmaker (BM) or a state totalisator (TAB), the position the horses finished in the race and the "Race Results"; as the programme only pays on the first place winner, the "Units Returned" totalled 60.80 (8 x 7.60), -- 6 of 16 -- 7 with a "Profit" of29.80 units (60.80 - 31.00); (c) how much to bet on each horse for each Investor: (i) the bet placed by Rebbeck in his name is one bet in one monetary amount; (ii) the program scans each Investor's account for the current balance (e.g. $6,450), subject to limited exceptions in individual Investor accounts as referred to further below at (ix), (iii) the figure scanned is divided by 1,000 (e.g. $6.45), (iv) the number thus calculated is rounded down to a whole number (e.g. 6); (v) this is regarded as a $6 monetary value in our example; (vi) the aggregate of the monetary value for all Investors is calculated (e.g. $1,681 to choose a random figure), (vii) at the start of the day's betting the aggregate monetary value so calculated is then the unit value in which bets are placed by Rebbeck; e.g. if the programme determines 10 units to be bet on a particular horse in a race then Rebbeck bets $16,810 in our example- the programme has been written so as to bet approximately 3% of the total value of all Investors' accounts (i.e. approximately 30 units) on any given race; (viii) the value ofthe units bet by Rebbeck (i.e. $1,68 1) does not change during the course of a race day, regardless of results in individual races; (ix) the exceptions referred to above at (ii) are that an Investor may request, prior to the commencement of a race day, to be excluded from the day's betting, or that a different monetary value apply to his or her unit; where an Investor requests to be excluded from a day's betting his or her account would be excluded from the scan; where an Investor requests a variation to apply, e.g. in the example given above if the Investor wants a $3 monetary value instead of $6 monetary value, this would be programmed in to that Investor's account so that the scan would pick up a $3 monetary value for that Investor; such requests, when made, are usually accommodated but can be disallowed; (x) unit values for Investors are constant for the Investor for the day, and can vary only following a day's racing; (xi) an Investor cannot intervene during the course of a race day to give any instructions as to bets, or to vary bets on the Investor's behalf, -- 7 of 16 -- 8 that is, during the course of a race day an Investor has no control over the races which are bet on, which horses are backed or the manner in which the bets are placed; (d) how the winnings/losses on each race are split between Investors: (i) at the end of the race day, an amount is debited or credited to each Investor's account, according to whether the net result for the day is an increase or decrease in the number of units won or lost on Rebbeck's betting for the day; each Investor's account is adjusted up or down by that number of units multiplied by that Investor's monetary value per unit ($6 in our example); (ii) see examples at Annexure D, so that for instance, in the case of Race 2 at Flemington on I January 1999, if an Investor's account dictated a monetary value per unit of $ 1 0.00 for that day, a profit of $298.00 would immediately have been posted to that Investor's account ($608.00 $310.00). The Hong Kong Multis programme operates in a similar way to the Trojan programme. There are, however, these differences: (a) all bets are what are called "exotics", that is, combinations oftrifectas and quinellas and, much less frequently, triple trios, doubles and trebles - a trifecta is the selection of the first, second and third winning horses in order; a quinella is the selection of the first and second horses in any order; a triple trio is the selection of the first, second and third horses in any order in 3 designated races (normally races 3, 4 and 6); a double is the selection of the first horse in each of 2 consecutive races; a treble is the selection of 3 winners in 3 designated races; (b) all racing in Hong Kong is conducted by the Hong Kong Jockey Club, which rates all horses permitted to race in Hong Kong and grades the events ego Class I race, Class 2 race, in which rated horses can start; (c) all betting is done via a computer link with the Hong Kong totalisator which is run by the Hong Kong Jockey Club, that is, there are no on-course bookmakers as in Australia; (d) the Investor did not have access on the web to as much information on individual races in Hong Kong as is available for races in Sydney, Melbourne and Brisbane under the Trojan programme; (e) the number of combinations backed in each race vanes between approximately 400 and 1,000; (f) the overriding discretion in Rebbeck is a decision by Rebbeck, prior to the placement of a bet, whether or not to bet on a particular race selected by the programme, having regard to: -- 8 of 16 -- ( 9 • changes in weather conditions, e.g. wet track • track conditions not previously known or wrongly assessed, e.g. barrier conditions • late scratchings • change of jockey; (g) to date the betting calculations have been based on 1% not 3%. The Hong Kong Multis programme determines: (a) subject to an overriding discretion in Rebbeck referred to below, the races on which to bet: (i) in Hong Kong, race meetings are held twice weekly for approximately 9 months of the year at either of the 2 race courses, Happy Valley or Sha Tin, (ii) the programme scans each race at these race meetings and takes only those events which have a field of between 10 and 14 horses; (iii) the overriding discretion in Rebbeck referred to is a decision by Rebbeck, prior to the placement of a bet, whether or not to bet on a particular race selected by the programme, having regard to: • • • • changes in weather conditions, e.g. wet track track conditions not previously known or wrongly assessed, e.g. barrier conditions late scratchings change of jockey; (b) the combinations to be bet in each race: (i) the programme has the history of all races in Hong Kong showing previous results for each race over the last 4 years; (ii) in the case of a trifecta, the programme: • selects the number of horses to run first, then the number to run second and then third based on the historical data; • determines the "band cut" for these combinations - the "band cut" is that portion of the range (eg. HK$500 to HK$3,000) within a specified range of projected returns (e.g. HK$100 to HK$ 10,000), which the programme identifies as having yielded the most profitable return over the last 4 years; • Annexure E shows for Race 3 at Sha Tin, in line 1 of the Section 1 box, that the programme has selected horse number 2 to win, horses 3 and 4 to run second and horse 5 -- 9 of 16 -- \ ;' 10 to run third, at a cost ofHK$20 taken 1,000 times and so on for each of the remaining 9 lines in Section 1; each section contains only 10 betting combinations because the Hong Kong totalisator will not accept more than 10 betting combinations for anyone bet at a time, as this helps to prevent professional punters "crunching the market"; (iii) in the case of a quinella, the programme: • identifies an arbitrage factor in the betting; • determines the number of times the combination should be taken, given the amount of the bet; • Annexure F shows for Race 1 at Sha Tin the various betting combinations the programme calculates will at least cover the total amount (HK$119,150) bet on the race plus a selected margin (100, 3 5, 3 5, 100 etc); the first box shows that the programme has selected horse I to run first and horse 3 to run second, that the "historical" price increased by the margin applicable in this instance is 13.9, that the current Hong Kong totalisator price is (the difference between 22.0 and 13.9 being the arbitrage factor); and that this combination should be taken 972 times given the amount of the bet; (c) how much to bet for each Investor: (i) for both trifectas and quinellas, the program operates in the same way as described in paragraph 19(c), except that the program calculation is based on 1% rather than 3%, (d) how the winnings/losses for each race are split between Investors: (i) for both trifectas and quinellas, this operates in the same way as described in paragraph 19(d). Investors' access to web site Investors are able to access information displayed on the web site as follows, on a read only basis: Trojan (a) a schedule of available races for a race day is posted on the web for each Investor to view. See examples at Annexure G which shows Sydney, Melbourne and Brisbane races on 1 January and 3 July 1999; (b) immediately before a race and at any time after the race is over, an Investor can see on the web what the programme has determined for that race, that -- 10 of 16 -- ( \ 11 is, an Investor can see how many units have been bet, on which horses and whether with the totalisator or on course bookmaker and the total value of the units. See the examples at Annexure D; (c) at the end of a race day, an Investor can see the results for the full day's racing on the web and the Investor's net position for the day. See the examples at Annexure H for I January and 3 July 1999, Hong Kong Multis (d) a single page schedule of available races for the race day is posted that day on the web for each Investor to view in a format very similar to the schedule of available events in the Trojan programme (see Annexure G); the schedule also shows the type of bets to be taken in each race, that is, trifecta, quinella etc; the single page schedule is not retained on the computer and no hard copy is available; the Investor can view a Race Card on the web for each race, which gives details of each race and each horse in the race - see Annexure I; (e) before a race, an Investor can see on the web what the programme has determined in terms of combinations for each race, for example, in a trifecta the Investor can see the horses the programme has selected to run first, then for each of these horses, the horses selected to run second and so on; however, this data is not retained on computer and no hard copy is available; (1) immediately after a race, an Investor can see on the web the results of the race. See examples at Annexure J which show the trifecta result for Race 4 at Happy Valley on 19 May 1999 (a winning combination of horses 3, 8 and 7, for a bet ofHK$119,200.00 and a profit ofHK$169,300.00) and the quinella result for Race 6 at Sha Tin on 15 May 1999 (a winning combination of horses 5 and 8, for a bet ofHK$176,210.00 and a profit of HK$128,588.00); (g) the day after the races in Hong Kong, an Investor can view his or her account to see whether a profit has been credited or a loss debited to his or her account; there is a day's delay because of the late night racing in Hong Kong and the need for a currency conversion to be made before posting the result to the Investor's account; there is at present no computer print-out available after the day's races which shows the betting results for each individual Investor and the Investor must view his or her individual transactions account to determine the net position for the previous day's racmg; Investor accounts - both programmes (h) by clicking on 'view' on the web site an Investor can bring up on screen the schedule of available races (Annexures G and I), the horses or combinations selected for each race (Annexures E and F) and the results of a full day's racing (Annexures Hand J). -- 11 of 16 -- ( \ 12 Other relevant factors The fact that a bet is placed on behalf of a number of Investors on the same races and the same horses or combinations and therefore, in the eyes of the totalisator or the bookmaker, a larger sum is being bet than if the individuals bet for themselves, never results in a better return than if the same amounts had been bet in the names of individual Investors. Betting a large amount on any given horse or combination in any given race can reduce the dividend or price for that horse or combination in that race. This is almost invariably the case with respect to a bet placed on the totalisator especially if the bet placed is large compared with the total amount bet at that time on the totalisator. In respect of paragraph 24, in relation to the Trojan programme the total amount bet is the total win and/or place bets on the particular race on which the bets are placed; in relation to the Hong Kong Multis programme the total amount bet is the total of quinella bets or the total of trifecta bets, as the case may be, placed on the totalisator. Additional Agreed Material Additionally, the parties referred to the exhibits to the affidavits of Andrew Paul Keighran and Adrian Leslie Rebbeck filed herein, as agreed material. These affidavits were not annexed to the Statement of Agreed Facts to avoid unnecessary duplication and bulk. Also there were certain annexures not included in this judgment. [3] Section 9 ofthe Corporations Law defines managed investment scheme as follows: "managed investment scheme" means: (a) a scheme that has the following features: (i) people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not) (ii) any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders) (iii) the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions); " -- 12 of 16 -- 13 Section 9 does not separately define "managed", "investment" or "scheme". It does however define "benefit" as meaning "any benefit, whether by way of payment of cash or otherwise". [4] The legislative history ofthe provision (as submitted by ASIC) is as follows: "The Managed Investment Act 1998 (Cth) which came into force on 1 July 1998 introduced the new regulatory structure contained in Chapter 5C of the Corporations Law entitled "Managed Investment Schemes". This replaced the "prescribed interest" provisions formerly in Division 5 of Part 7.12 ofthe Corporations Law. Section 601ED, in Chapter 5C, provides that a managed investment scheme must be registered in certain cases, including if it has more than 20 members. Section 601EA-601QB provide for the regulation of managed investment schemes. Before 1 July 1998 the Corporations Law defined "securities" as including a "prescribed interest" (former s.92(1)(c)). A "prescribed interest" was formerly defined to include a "participation interest", which itself was formerly defined in s.9 as follows: (a) in any profits, assets or realisation of any financial or business undertaking or scheme whether in Australia or elsewhere; (b) in any common enterprise, whether in Australia or elsewhere, in relation to which the holder of the right or interest is led to expect profits, rent or interest from the efforts of the promoter of the enterprise or a third party; or (c) in any investment contract; whether or not the right or interest is enforceable, whether the right or interest is actual, prospective or contingent, whether or not the right or interest is evidenced by a formal document and whether or not the right or interest relates to a physical asset, ... ". [5] In interpreting the meaning of a "managed investment scheme" as defined, some assistance can be gained from the cases that considered the old Div 5 of Pt 7.12 of the Corporations Law. However, the definition under consideration is relevantly quite different to the old provision. The assistance can be gained from the leading case in the area Australian Softwood Forest Pty Ltd & Ors v Attorney-General for the State of New South Wales; Ex reI C;orporate Affairs Commission (1982) 148 CLR 121 where with respect to "scheme" Mason J (as he then was) and with whom Gibbs CJ and Stephen J agreed, said at 129: " ... all that the word 'scheme' requires is that there should be 'some programme, or plan of action' .... ... there is nothing in the notion of an undertaking or scheme that requires or implies that there is joint participation in everything comprised in the plan or that there must be a share or pooling of profits or receipts." -- 13 of 16 -- 14 [6] Again, as to "common enterprise" some assistance can be gained from Australian Softwood Forests (supra) and in particular at 133 where Mason J, said: " ... the argument is that in order to constitute a "common enterprise" there must be a joint participation in all the elements and activities that constitute the enterprise. I do not agree. An enterprise may be described as common if it consists of two or more closely connected operations on the footing that one part is to be carried out by A and the other by B, each deriving a separate profit from what he does, even though there is no pooling or sharing of receipts of profits. It will be enough that the two operations constituting the enterprise contribute to the overall purpose that units them. There is then an enterprise common to both participants and, accordingly, a common enterprise. " Gibbs CJ and Stephen J agreed. [7] The new regulatory structure contained in Chapter 5C of the Corporations Law replaced the "prescribed interest" provisions formerly in Div 5 of Pt 7.12 of the Corporations Law. It was submitted by ASIC that some assistance in the interpretation of the definition of "managed investment scheme" can be gained from ) Australian Softwood Forests (supra). In particular ASIC referred to the passage in the judgment of Mason J (with whom Gibbs CJ and Stephen J agreed) at 129-30 for the submission, relying upon the purposive interpretation imposed by s 109H of the Corporations Law, that the same approach should be adopted as was adopted by their Honours in that case when interpreting the new provision. It was submitted that the following can be gleaned from that passage: (a) that there was no very good reason for reading the words down; (b) that the context was of prohibitions unless the statutory requirements were met; (c) that the presence of the power to exempt by regulation other rights or interests from the definition was also of telling significance; and (d) that it would be different if the Court could glean from the legislative provisions an overall purpose which, being limited in scope, justified a reading down of the definition. I am of the view that that submission is correct and propose to interpret the meaning of "managed investment scheme" accordingly. [8] The scheme on its face is not an investment in the true sense; it is a betting scheme where the investor permits the respondents to place bets either in Australia or in Hong Kong (depending upon the scheme in which the money is invested) on horse races conducted in those countries. The selections are initially made by an elaborate computer programme but ultimately whether or not a bet is made depends upon the final judgment of the fifth respondent Adrian Leslie Rebbeck. A disturbing feature of the scheme is that although the moneys received from investors are paid into accounts held by either the third respondent or the seventh respondent, they are then paid ultimately to Rebbeck, who places the bets either in Hong Kong or Australia. He holds the betting accounts with Bookmakers or Totalisators. -- 14 of 16 -- 15 [9] The interpretation of the definition of "managed investment scheme" can be dealt with by considering each of paras (i) (ii) and (iii) of the definition separately. [10] As to (i) there can be no doubt that the investors in both schemes contributed "money or moneys worth". The question is whether by doing so they acquired rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not). [11] It seems to me that it is clear that by investing moneys in the scheme, investors acquired at least the right to participate in the sophisticated betting system devised and determined by a soft ware programme operated by the agent. They also obtained the benefit of the alleged expertise of Rebbeck in ultimately determining whether a bet should be placed, and in addition the right to share in any betting profits produced by the betting system. In my view it is clear also that the rights obtained are "actual" because they are acquired immediately upon payment. I agree with the submission by ASIC's counsel that it is irrelevant, for the purpose of the definition, that one of the benefits produced by the scheme might be prospective or contingent e.g. the profits. [12] As to (ii) of the definition, this, as I perceived it, was the main plank of the respondent's submissions. It was submitted that in no sense could it be suggested that the contributions are made by individual investors were "pooled" within (ii) of the definition. It was submitted that "pooled" conveys a narrower notion than "use" or "employment" in common. Reference is made to the Macquarie Dictionary definition of the verb "to pool" as meaning "to enter into or form a pool". Reference was also made to the meaning of the noun "pool" in the same dictionary as follows: "3. a combination of interest, funds, etc, for common advantage; 4. the combined interests or funds; 5. a facility or service that is shared by a number of people ... ". [13] It was further submitted by reference to the Oxford English Dictionary that the verb "pool" meant "to throw into a common stock or fund to be distributed according to agreement; to combine (capital or interest) for the common benefit; spec. Of competing railway companies, etc: to share or divide (traffic or receipts)". The central submission made was: "The fact that Rebbeck places the one bet per horse per race does not mean that the aggregate bet is not to be regarded as a number of individual bets per investor in accordance with the investors accounts. Each person is betting a different amount by reason of the different values ascribed to different clients' units, even though the same number of units is bet for each client. As between investor and agent, separate accounts are maintained. Further, as has already been mentioned the client can decide not to bet at all, or can vary the amount to be bet. And at the end of the day, accounting to our client is not on the basis of a sharing in a pool of winnings, but on the basis of the winnings derived from the amount ventured or the individual clients account." [14] Against this it was submitted by ASIC that all of the contributions are "pooled" in the sense that they are paid into one of only two bank accounts and that it would be -- 15 of 16 -- ( \ [15] [16] 16 wrong to suggest that by this fact, the moneys are not pooled. An analogy was drawn with a solicitors trust account where for example solicitors trust account funds are paid out only at the direction of the individual client for that client's transactions. The contrast is drawn between that and the current scheme where the moneys in the two bank accounts are used collectively for the placing of bets, ultimately at Rebbeck's discretion; and collectively for transfers between one betting agency and another, again, at Rebbeck's discretion. As an aid to interpreting (ii) of the definition, counsel for the respondents referred me to DKLR Holding Co (No 2) Pty Ltd v The Commissioner of Stamp Duty (NSW) (1981-1982) 149 CLR 431 where the phrase "to be vested" and particularly to the judgment of Gibbs CJ at 439 where His Honour said: "The words 'to be', before a past participle, and used in relation to a noun, can express obligation, intention, possibility or simply futurity; the sense must in every case depend on the context in which the words appear." In my view the proper approach to interpreting (ii) of a definition is an objective one. Applying that test there can be no doubt, that the contributions "are to be pooled". It is clearly the purpose of the scheme and in any event each of the investors knew that the scheme did not permit individual bets being made for individual investors. [17] As to the balance of (ii), I am of the view that the interpretation of "common enterprise" at 133 of Australian Softwood Forests (supra) referred to in para 5 of this judgment is applicable here and that therefore there is no doubt that these schemes provided for the pooled contributions to be "used in a common enterprise, to produce financial benefits, ... for the people (the members) who hold interests in this scheme". [18] As to (iii) of the definition it is clear from the statement of agreed facts that other then maintaining the right to direct that no bets be placed on a particular day the members of the scheme "do not have day to day control over the operation of the scheme". [19] It follows then that the schemes carried on by the respondents are each a "managed investment scheme" within the meaning of that term as defined in s 9 of the Corporations Law. I therefore declare that the scheme set out in the statement of agreed facts are managed investment schemes within the meaning of s 9 of the Corporations Law. [20] I shall hear argument as to costs. -- 16 of 16 --