Australian Securities and Investments Commission, Re [1999] QSC 219

" SC 9 or. a (9 • •• • JUSTICE State Reporting Bureau ," .. ----:. -.. 3b'5"8\ TRANSCRIPT OF PROCEEDINGS Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MUIR J No 5481 of 1999 IN THE MATTER OF THE CORPORATIONS LAW and REVISED COPIES ISSUED State Reporting Bureau Date' / IN THE MATTER OF THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION and IN THE MATTER OF MALCOLM BARTLEY TROY and IN THE MATTER OF IVAN ALFRED CLARKE and IN THE MATTER OF CALIFORNIA INTERNATIONAL (FAR EAST) LIMITED BRISBANE .. DATE 18/08/99 JUDGMENT ·1111 Floor, The Law Courts, George Slreet, Bdshanc, Q. 4()()() Telcllhone: (()7) 32.t7 43110 f:lx: (07) :n47 ~5.12 -- 1 of 13 -- 180899 T01/JW5 M/T 5168/99 (Muir J) HIS HONOUR: I publish my reasons in this matter. In the time available you will not be able to come to grips with the full extent of my r€asoning. But a hurdle which I was not able to surmount is that it seems to me that there is a clear risk or downside to aggrieved persons within the 10 meaning of section 1323 subsection 1 of the Corporations Law should the respondent leave the country. I was not persuaded that there was any urgent need for him to do that. The material does disclose that. The tests that he needs to undertake in order to obtain admission to the gene therapy program can all be undertaken here. Mr Roney sought to have me not receive the affidavit which c-) contained Dr Gibbs' most recent report which dealt with the 30 question of the tests. But it seems to me that that was something which really needed to be addressed by the respondent as much as by the applicant. And that even in the absence of Dr Gibbs' report the conclusion may well have been the same. 40 HIS HONOUR: On the substantive application then there is no need to make any formal order in view of an order made 50 by me on 23 July 1999 ordering that the respondent be prohibited from leaving Australia without the consent of the Court and that he deliver up any current passport held by him. I dismiss the respondent's oral application to have those orders vacated. 60 2 JUDGMENT -- 2 of 13 -- 180899 T01/JW5 M/T 5168/99 (Muir J) HIS HONOUR: I order that the costs of and incidental to the application be reserved. HIS HONOUR: I order that personal service of all orders made in this matter and affidavits fil~d by or on behalf of the applicant on or prior to today's date be deemed to have been effected on the second respondent and third respondent upon expiration of seven days from the date of filing of an affidavit by an officer of the applicant deposing as to the sending of such documents by pre-paid registered post addressed to the second respondent and third respondent care of the third respondent, 8th floor, Jade Centre, 98 Wellington Street, Central Hong Kong. I reserve the costs of the application for substituted service. I further order that there be liberty to apply. That order is made in the application generally. 3 JUDGMENT 10 20 30 40 50 60 -- 3 of 13 -- ( 3bBS{ IN THE SUPREME COURT OF QUEENSLAND No. 5481 of 1999 Brisbane Before Mr Justice Muir [In the matter of The ASIC] CATCHWORDS: Counsel: IN THE MATTER of the Corporations Law and IN THE MATTER of THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION and IN THE MATTER of Malcolm Bartley TROY and IN THE MATTER of Ivan Alfred CLARKE and IN THE MATTER of CALIFORNIA INTERNATIONAL (FAR EAST) LIMITED REASONS FOR JUDGMENT - MUIR J Judgment delivered 18 August 1999 CORPORATIONS LAW - s.1323(1) of the Corporations Law - orders sought prohibiting respondent from leaving Australia without consent of court - whether necessary or desirable to do so - insufficient evidence of any present need for respondent to leave Australia - respondent ordered to remain in Australia Mr G.M. Egan for the Applicant Mr P.l Roney for the Respondent Australian Securities and Investments Commission as corporate regulator. Solicitors for the Respondent:WitheriffNyst Hearing Date: 11, 15 June 1999; 6, 7, 19,23 July 1999; 6, 12 August 1999 -- 4 of 13 -- ; , ( 2 IN THE SUPREME COURT OF QUEENSLAND No. 5481 of 1999 Brisbane Before Mr Justice Muir [In the matter of The ASIC] IN THE MATTER of the Corporations Law and IN THE MATTER of THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION and IN THE MATTER of Malcolm Bartley TROY and IN THE MATTER of Ivan Alfred CLARKE and IN THE MATTER of CALIFORNIA INTERNATIONAL (FAR EAST) LIMITED REASONS FOR JUDGMENT - MUIR J Judgment delivered 18 August 1999 The applicant the Australian Securities and Investments Commission ("ASIC") seeks orders that the respondent be prohibited from leaving Australia without the consent of the Court and that he deliver up to the Court all current passports held by him. Power to make such an order is to be found in s.1323(1) of the Corporations Lmv which relevantly provides: "1323(1) Where: (a) an investigation is being carried out under the ASC Law or this -- 5 of 13 -- ) 3 2 Law in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Law; (b) a prosecution has been begun against a person for a contravention of this Law; or (c) a civil proceeding has been begun against a person under this Law; and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called 'an aggrieved person') to whom the person referred to in paragraph (a), (b) or (c), as the case may be, (in this section called the 'relevant person'), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for securities, future contracts or other property, the Court may, on application by the Commission or by an aggrieved person, make one or more of the following orders: (h) an order appointing: (i) .. , (ii) if the relevant person is a body corporate - a receiver or receiver and manager, having such powers as the Court orders, of the property or of part of the property of that person;". It will be seen that a prerequisite to the exercise of power under sub-s (1) is that the "Court considers it necessary or desirable ... for the purpose of protecting the interests of a person (in this section called an 'aggrieved person') to whom (the defendant) ... is liable, or may be or become liable to pay money, whether in respect of a debt, by way of damages or compensation or otherwise or to account for securities, future contracts or other property ... " Summary of applicant's contentions The respondent's counsel, Mr Roney, concedes that an investigation is being carried out under the Corporations Law and the existence of a triable issue as to whether the respondent has contravened the Corporations Law. He submits though, that an order which would prevent the applicant from leaving Australia is not necessary or desirable for any of the purposes specified in s 1323(1). He points out, correctly, that it is not sufficient "to make it necessary or desirable to make an order if it is proved there is a relevant investigation which, -- 6 of 13 -- 4 5 6 7 8 3 if successful, and is followed by a successful prosecution might give rise to a liability to pay compensation" to aggrieved persons": cf Connell v NCSC (1989) 1 ACSR 193 at 204. The reason for the respondent's stated desire to leave Australia The respondent is 60 years of age and has a long history of heart disease. he suffered heart attacks in 1987, 1994 and 1996. In early 1997 he was advised that it was desirable that he undergo quadruple bypass open heart surgery. There is evidence to support the respondent's sworn belief that a bypass operation poses a significant risk of death due to his excess weight and the extent of his disease. The respondent recently heard of and commenced to investigate alternative methods of treatment for his heart condition. One of his treating general practitioners, Dr Tait, swears to the existence in Boston of gene therapy treatment for coronary artery disease. A medical centre there carries out gene therapy which, according to Dr Tait, is non-invasive and "does not carry many of the risks associated with open heart surgery. The gene injected into the heart works by a process referred to as angiogenesis which stimulates the growth and development of new blood vessels thereby improving the blood flow to those parts of the heart which have been deprived of their blood flow because of the coronary artery damage." Another general practitioner who has been treating the respondent for his heart condition approves of the respondent's desire to travel abroad in order to explore other options for treatment. Peter Vale, a specialist in cardiology and vascular medicine who practises at the Boston Medical Centre, has sworn an affidavit in which he describes the nature of the gene therapy treatment, its success rate and the screening process followed before prospective patients are selected for treatment. The screening process involves tests and procedures at the medical centre in Boston over a 3 to 4 day period. If an applicant for the course passes the screening process treatment is normally undertaken within a month. -- 7 of 13 -- 9 10 11 4 The applicant calls into question the respondent's bona fides and it is submitted on behalf of the applicant that the respondent has not demonstrated a need to travel to the United States in order to determine whether he can gain acceptance into the gene therapy programme. The point made is that, on the evidence of Dr Vale, a person must satisfy a number of strict criteria in order to qualify. It is then submitted that procedure in Boston it is possible for tests to be conducted here which will disclose whether or not a patient could meet the criteria if tested in Boston. Dr Gibbs, a vascular physician, practising in Brisbane has considered materials relating to the respondent and has expressed the opinions that - (a) The respondent has a "poor ejection fraction" which precludes him from the gene therapy trial. (b) All of the tests which the Boston Clinic will carry out in order to determine suitability for gene therapy are readily available in Australia. (c) If the respondent has experienced a recent onset of chest pains, as he asserts, he is experiencing unstable angina and "should be reviewed by a cardiologist as soon as possible. In particular, he should not undertake overseas travel ... until that is further evaluated". Matters relevant to the existence of a risk that if the respondent leaves the jurisdiction he will fail to return and cease to be amenable to court orders. The applicant contends that the respondent's principal reason for wishing to leave the jurisdiction is to put himself beyond reach of the applicant and the legal processes which may be instituted against him as a result of the applicant's investigations. It is also submitted that, out of Australia, the respondent will have readier access to moneys obtained unlawfully from investors in Australia. -- 8 of 13 -- ( ) (\ ( 5 12 In an affidavit sworn by the respondent in these proceedings in response to questions 13 raised by me about his financial status he swore that - (a) neither he nor his wife has any interest in real property in Australia or elsewhere; (b) he does not own a motor vehicle; (c) a foreign corporation provides him with the use of a 1989 model Mercedes Benz; (d) his only other assets are jointly owned household items and personal effects of a relatively modest value, $318 in an Australian bank: account and US$5000 in a Hong Kong bank: account. The applicant obtained a copy of statements in respect of the respondent's American Express account. Those statements disclose the payment by American Express card of substantial sums of money. For example, Date 27.11.98 16.12.98 26.12.98 29.12.98 8.2.99 10.2.99 10.2.99 10.2.99 17.2.99 17.2.99 9.5.99 10.5.99 10.5.99 12.5.99 29.5.99 Payee Bruce Lynton BMW Southport Dare Gallery Prahran (furniture) Chandlers Bundall QANTAS ticket Miss Troy Bruce Lynton BMW Southport QANTAS Club membership Miss Troy Air NZ return ticket Brisbane Auckland (Miss Smith) Amount $13,335.00 1,029.00 1,690.00 332.00 Air NZ return ticket Brisbane Auckland (Ms Cruickshank:) Robina Flight Centre Robina 12,000.00 540.00 649.00 649.00 5,563.00 840.00 264.64 650.00 370.45 Pindara Private Hospital Le Meridien N oumea Harvey World Travel Irriki Island Resort Vanuatu Le Meridien Vanuatu Myer Megamart Coorparoo Hi Fi 1,503.69 5,229.75 The total of transactions on the credit card for the periods stipulated below were - -- 9 of 13 -- 14 15 16 17 6 Account date Total 3.12.98 6.1.99 3.2.99 3.3.99 5.4.99 4.5.99 3.6.99 5.7.99 $16,453.00 14,355.00 4,222.00 27,112.00 16,353.00 2,602.00 25,300.00 27,066.00 In his oral evidence the respondent swore that Ian Alfred Clarke, a resident of Hong Kong, and a responde t to these proceedings, under an agreement entered into between the respondent and Mr Clarke in Hong Kong last year, met the payments required to be made to American Express by the respondent. The agreement imposed no upper limit on transactions, but prior to incurring any "major" liability, it seems that the respondent made a practice of contacting Mr Clarke and obtaining his approval. When asked about the term of the agreement he responded - "It was just a verbal agreement ... and obviously it'll come to a close when ASIC have intervened in the programme." The respondent was asserting, implicitly at least, that the payments were in lieu of the payment of commission by Mr Clarke. He swore also that Mr Clark had offered to meet the cost of his medical treatment in Boston. No hint of the above source of income was given in the respondent's 11 August 1999 affidavits. I should mention also that indirectly through Mr Clarke, the applicant is provided with accommodation in a penthouse unit on the Gold Coast and the use of a car. There is evidence which establishes a prima facie case that in breach of the Corporations Law - (a) Mr Clarke by use of an entity California International (F ar East) Limited ("CIL") has -- 10 of 13 -- 18 19 7 promoted a scheme under which persons in Australia as a result of representations made in Australia have paid moneys to CIL in Hong Kong consequent on representations to the effect that they will be entitled to returns on their investments of 240 percent per annum or more. (b) The respondent has acted as agent for CIL in procuring investments. (c) Some millions of dollars have been paid into accounts in Hong Kong controlled by Mr Clarke in connection with CIL's investment scheme or schemes. (d) None of the respondent, Mr Clarke or CIL is a licensed investment advisor. In my view the evidence establishes the desirability, for the purpose of protecting the interests of "aggrieved persons'" that an order be made which restricts the respondent's ability to travel out of Australia. There is evidence to support the applicant's assertions of involvement, in more than a peripheral way, by the respondent in unlawful activities promoted by Clarke. The evidence shows that the respondent participated in the setting up of a scheme or schemes and that, whatever the true relationship between himself and Clarke, the applicant has enjoyed and probably continues to enjoy Clarke's confidence. It is significant, in the present context, that the respondent has a loose arrangement with Clarke under which the respondent is able to have Clarke meet the respondent's expenses without any agreed limit and, seemingly, without any restriction as to the nature of the expenses for which he is entitled to be reimbursed. The respondent lives in a penthouse unit. A Mr Martin has sworn that the respondent is the caretaker of the unit and is to pay rent for it. The probability, in my view, is that if any rent is to be paid it will be reimbursed by Mr Clarke or his interests. On the respondent's evidence Mr Clarke is his only significant source of income. It is difficult to resist the conclusion that the likelihood of the respondent's cooperating with the applicant in its investigations and in any proceedings which it may bring against -- 11 of 13 -- ( (' " 20 21 22 8 Clarke or CIL will be enhanced whilst the respondent is within the jurisdiction. He has recently declined to co-operate with the applicant in its investigation. The respondent may have no or very little funds of his own from which to meet any liabilities to aggrieved persons but, for the reason just advanced, the ability of aggrieved persons to recover moneys from I others (and also the respondent) are likely to be improved if the respondent remains in Australia. Furthermore, if the respondent is outside the jurisdiction it will be more difficult to monitor or to control access by the respondent to moneys at the disposition of Clarke or CIL. The applicant has not chosen to be candid about his personal affairs and I think, given the above background, it would be naive not to view with a degree of scepticism assurances offered by him as to the purpose for his wishing to leave Australia and any protestations as to an intention to return. Although the pre-conditions necessary for the operation of s 1323 have been fulfilled, it does not follow, necessarily, that the orders sought by the applicant must be made. The discretion conferred by provisions such as that under consideration has been described as "very wide". Connell v NCSC (supra) at 206. The exercise of the discretion calls for an exercise in balancing public and private rights. See e.g. Corporate Affairs (NSW) v Prime Commodities Ply Ltd (1987) 11 ACLR 584. The right on the part of an Australian citizen to move freely in and out of Australia is regarded as an important one. Prime Commodities Ply Ltd (supra) and ASIC v Ivey (1998) 29 ACSR 391 at 393-4. In my view a court should be most reluctant to interfere with such a right in circumstances in which it is sought to be exercised to enable a respondent to obtain necessary or appropriate medical treatment in respect of a life threatening complaint. In this case, I profess some skepticism as to the respondent's bona fides. The evidence establishes that tests can be carried out in Australia which will show quite readily whether or not the respondent -- 12 of 13 -- I \ ( 23 24 25 26 9 has any realistic prospects of being admitted to the gene therapy programme. One would therefore wonder why the respondent would not wish to take this course rather than incur the additional cost and risk of travelling to Boston in order to find out what can be readily ascertained here. Although the respondent is 60 years of age and has a wife and daughter resident in Australia, the evidence does not disclose to me any strong links with Australia which would make him reluctant to return to Australia should he face prosecution and the threat of a substantial jail term here. As mentioned earlier, the respondent's sole source of income is based in Hong Kong and neither he nor his wife owns real property here. Whilst sympathetic with the respondent's unfortunate physical condition, I am unable to conclude, on the evidence presently before me, that here is any present need for the respondent to leave Australia in order to further appropriate enquiries into gene therapy or other treatments. I conclude that the balancing exercise referred to above favours the making of the orders sought by the applicant. I will hear submissions as to the orders which ought be made to give effect to these reasons. -- 13 of 13 --