FEDERAL COURT OF AUSTRALIA In the Matter of Study Overseas Now Pty Ltd (Deregistered) Australian Competition &Consumer Commission v Australian Securities & Investments Commission [2007] FCA 1009 CORPORATIONS – deregistration – application for reinstatement of deregistered company by the Australian Competition and Consumer Commission – purpose of joining company as respondent to penalty proceedings in relation to price fixing and related contraventions of Trade Practices Act 1974 (Cth) – proposed order for reinstatement by consent – whether order within power and appropriate – whether ACCC "person aggrieved" – whether proposed reinstatement just – order for reinstatement made Corporations Act 2001 (Cth) s 601AH(2), s 601AA Trade Practices Act 1974 (Cth) s 45 Competition Policy Reform (Western Australia) Act 1996 Federal Court of Australia Act 1976 (Cth) s 21 Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688 cited Newham v Australian Securities and Investments Commission (2000) 35 ACSR 147 cited Gausten v Outokumpu Australia Pty Ltd (unreported, Supreme Court of Western Australia, Master Sanderson, 20/11/1998) AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION WAD 89 OF 2007 FRENCH J 4 JULY 2007 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 89 OF 2007 IN THE MATTER OF STUDY OVERSEAS NOW PTY LTD (deregistered) ACN 106 865 310 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Plaintiff AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Defendant JUDGE: FRENCH J DATE OF ORDER: 4 JULY 2007 WHERE MADE: PERTH BY CONSENT THE COURT ORDERS THAT: 1. Pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) the Australian Securities and Investments Commission reinstate the registration of Study Overseas Now Pty Ltd. 2. The plaintiff lodge an office copy of the order for reinstatement with the Australian Securities and Investments Commission within 28 days of the date of the order. 3. Within 21 days of a request being made by the Australian Securities and Investments Commission to the plaintiff, the plaintiff cause any outstanding documents to be lodged or outstanding fees to be paid to the Australian Securities and Investments Commission. 4. There be no order as to the costs of the application for reinstatement. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 89 OF 2007 IN THE MATTER OF STUDY OVERSEAS NOW PTY LTD (deregistered) ACN 106 865 310 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Plaintiff AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Defendant JUDGE: FRENCH J DATE: 4 JULY 2007 PLACE: PERTH REASONS FOR JUDGMENT ON CONSENT ORDER FOR REINSTATEMENT OF REGISTRATION 1 During 2005 the Australian Competition and Consumer Commission (ACCC) began investigating concerns that education recruitment agents, including Study Overseas Now Pty Ltd (Study Overseas Now) and one of its former employees, Mr Bernard Yeo, had entered into an arrangement or understanding in 2004 in which the parties agreed not to offer or accept discounted school tuition fees from Korean students studying in Western Australia. 2 On 1 November 2006 the ACCC commenced proceedings against six of the parties to the agreement alleging, inter alia, contraventions of s 45 of the Trade Practices Act 1974 (Cth) (TP Act). The proceedings were WAD 312 of 2006. The corporate respondents named were Kokos International Pty Ltd, and IAE Edu Net Perth Pty Ltd. Individuals sued were Chul Woo Kim, Young Gil Pae, Sang-Hong Jung trading as Nanuri Education Centre and Rebekah Cabalt. The application was for pecuniary penalties, injunctions and others orders pursuant to ss 76, 80 and 86C of the TP Act and of the Competition Policy Reform (Western Australia) Act 1996 together with declaratory relief pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth). The ACCC says that Study Overseas Now was also a party to the conduct which is the subject of the proceedings. 3 On 7 December 2005 Patricia Yeo, in her capacity as a director of Study Overseas Now, lodged an application with the Australian Securities and Investments Commission (ASIC) under s 601AA of the Corporations Act 2001 (Cth) for voluntary deregistration of the company. The application embodied her declaration of the circumstances required by s 601AA(2) that: (a) All members of the company agree to the deregistration; and (b) the company is not carrying on business; and (c) the company's assets are worth less than $1,000; and (d) the company has paid all fees and penalties payable under this Act; and (e) the company has no outstanding liabilities; and (f) the company is not a party to any legal proceedings. 4 The records of ASIC show that the company was deregistered on 17 March 2006. The directors at the time of deregistration were Sachiko Suka, Yuriko Suka, Belinda Yeo, Pat Yeo and Noriko Suka. The ACCC wrote to Ms Belinda Yeo and Ms Pat Yeo on 10 April 2007 advising them that it intended to apply to the Court to have Study Overseas Now reinstated. In its letter the ACCC informed the two former directors that based upon evidence and information which it had obtained it was of the view that the entry by the company into an arrangement with other education recruitment agents in Western Australia contravened s 45 of the TP Act and/or the Competition Code of Western Australia. It also stated its belief that it was appropriate to join Study Overseas Now and Mr Bernard Yeo to the proceedings and to seek declaratory and injunctive relief as well as pecuniary penalties against both parties. 5 The ACCC has attempted to locate the other directors. It appears that Sachiko Suka, Yuriko Suka and Noriko Suka left Australia for Japan in 2005 in the case of Noriko Suka and 2006 in the case of the other two directors. The Japanese Fair Trade Commission was unable to provide assistance about their addresses. The ACCC has been unable to contact them. 6 At a directions hearing on 15 May 2007 the two former directors Belinda and Patricia Yeo were given leave to appear in the proceedings and to file and serve any affidavits in opposition to the application for reinstatement by 5 June 2007. No such affidavits have been filed. However the solicitors for Belinda and Patricia Yeo have joined with the ACCC and ASIC in agreeing to orders reinstating the registration of the company. 7 A company, or a director or member of the company, or a liquidator of the company may apply, under s 601AA(1) for its voluntary deregistration. A person may apply only if the circumstances which were set out in Ms Yeo's application for deregistration and referred to earlier exist (s 601AA(2)). The applicant must give ASIC any information that it requests about current and former officers of the company (s 601AA(3)). Where ASIC is not aware of any failure to comply with the requirements of s 601AA it must give notice of the proposed deregistration on its data base and in the gazette. And when two months have passed since the gazette notice ASIC may deregister the company (s 601AA(4)). 8 Reinstatement of a deregistered company is provided for in s 601AH, the relevant parts of which are as follows: (1) ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered. (2) The Court may make an order that ASIC reinstate the registration of a company if: (a) an application for reinstatement is made to the Court by: (i) a person aggrieved by the deregistration; or (ii) a former liquidator of the company; and (b) the Court is satisfied that it is just that the company's registration be reinstated. (3) If the Court makes an order under subsection (2), it may: (a) validate anything done between the deregistration of the company and its reinstatement; and (b) make any other order it considers appropriate. (4) ASIC must give notice of a reinstatement in the Gazette. If ASIC exercises its power under subsection (1) in response to an application by a person, ASIC must also give notice of the reinstatement to the applicant. (5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim. 9 The provisions of s 601AH(2) have the effect, relevant to this case, that the Court must be satisfied that the ACCC is a person aggrieved by the deregistration and that it is just that the registration be reinstated. The application of those statutory requirements was considered by Austin J in similar circumstances in Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688. In that case the ACCC submitted that it had a public duty to improve competition and efficiency in markets and to foster a fair and competitive operating environment for businesses. One of the strategies used to achieve that objective is litigation in cases of serious breaches of the TP Act. The ACCC considered, in that case, that the conduct which it alleged was a serious example of price fixing and market sharing and that it had a duty in the public interest to reinstate and sue the perpetrator of some of that conduct. The former officers of the company then before the Court accepted that the ACCC had standing to apply as did his Honour. 10 In relation to standing, the present case is relevantly indistinguishable from that before Austin J. I find that the ACCC has the necessary interest in proceeding against the company in the discharge of its statutory functions such that it is "a person aggrieved by the deregistration" for the purposes of s 601AH(2). 11 In the case before Austin J the company whose reinstatement was sought had been placed in liquidation by a members' voluntary winding up. In the present case the company was voluntarily deregistered. A director of the company made a declaration of solvency on 7 December 2005 under s 601AA(2). 12 The ACCC accepts that where a reinstatement is sought in order to enable an applicant to pursue a claim against the company reinstated, it must appear that the claim has reasonable prospects of success or raises a serious question to be tried: Newham v Australian Securities and Investments Commission (2000) 35 ACSR 147; Gausten v Outokumpu Australia Pty Ltd (unreported, Supreme Court of Western Australia, Master Sanderson 20/11/1998). 13 In her affidavit in support of the application for reinstatement, Bianca Sumner, a Project Officer employed by the ACCC, exhibited the written agreement which is at the heart of the proceedings instituted by the ACCC. That agreement contained the following provisions: To all English Language Institutions in Perth The Perth International Student Agencies, which are KOKOS International Pty Ltd, IAE Edu Net WA, Study Overseas Now, Nanuri Education Centre and Jobbok International, have organized an agreement along with the Council of Korean Agency. The agreement is proposed to prevent excessively discounted fees offered by the agencies mentioned above. The agencies pledges (sic) to offer fair dealings accordingly to the agreed conditions which are listed below that all International students (including Working Holiday Makers & Tourists) will not be offered discounts beyond the noted amount on the school's invoice. Unfortunately the problem has arisen to enormous proportions in Sydney and it sets a fine example. The agents there are competing with each other by offering 15-20% off their own commission to students. In result of this, students are taking this matter to their advantage and requesting for more concessions. It is believed that all persons it concern (sic) do not want this predicament to occur in this market in Perth. Therefore, The Council of Korean Agency wishes to monitor and control unfair commissions apart from official privileges offered by Education Institutes. It is also aimed to all Institutions to cooperate within the agreement for fair dealings in the Korean Market. Listed below are the agreed conditions: 1. The five agencies in Perth will organize a Net Work System and cooperate by working together and monitoring any illegal activities. 2. All other agencies should follow the system, which has been organized by the five agencies mentioned above, and carry it into an effect. 3. If any of the five agencies as well as others has performed unfair illegal activities will face a penalty fee ordered by the Council of Korean Agency. 4. All Education Institutions in Perth to cooperate by reporting to the Council of Korean Agency if any illegal activities are performed by any agencies. . No enrolment for school for 3 months. On the face of it the evidence of the agreement indicates that the ACCC's claim has reasonable prospects of success. 14 There are obvious public interest considerations in favour of the litigation proceeding against all companies said to have been party to the arrangements of which the ACCC complains. Given that those proceedings are still pending it is neither necessary nor desirable to enter upon any further analysis of their merits. It is sufficient to say that on the materials before the Court it is just that the company be reinstated. 15 In this case the Court is making an order by consent of the parties. In so doing it must be satisfied that the order is within power and appropriate. Where a proposed consent order satisfies those conditions, the Court will ordinarily make an order to give effect to the agreement which the parties have reached. 16 I will make the order as proposed. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French . Associate: Dated: 4 July 2007 Solicitor for the Plaintiff Corrs Chambers Westgarth Solicitor for the Defendant: Australian Securities and Investments Commission Solicitor for Belinda Yeo and Patricia Yeo: Bowen Buchbinder Vilensky Date of Filing Consent Orders: 20 June 2007 Date of Judgment: 4 July 2007