Schwartz, in the matter of Babybelle Pty Ltd (ACN 116 052 683) [2007] FCA 1469

FEDERAL COURT OF AUSTRALIA

Schwartz, in the matter of Babybelle Pty Ltd (ACN 116 052 683) [2007] FCA 1469

Corporations Act 2001 (Cth) ss 206A, 206B, 206G Adams v Australian Securities and Investments Commission (2003) 46 ACSR 68 IN THE MATTER OF BABYBELLE PTY LTD (ACN 116 052 683); SPENCER SCHWARTZ VID 697 OF 2007

GORDON J

4 SEPTEMBER 2007

MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 697 OF 2007

IN THE MATTER OF BABYBELLE PTY LTD (ACN 116 052 683)

SPENCER SCHWARTZ

Plaintiff

JUDGE: GORDON J DATE OF ORDER: 4 SEPTEMBER 2007

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

1. The application be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 697 OF 2007

IN THE MATTER OF BABYBELLE PTY LTD (ACN 116 052 683) SPENCER SCHWARTZ

Plaintiff

JUDGE: GORDON J

DATE: 4 SEPTEMBER 2007

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 By an ex parte application dated 7 August 2007, the plaintiff ("Mr Schwartz") sought leave under s 206G of the Corporations Act 2001 (Cth) ("the Act") to manage a proprietary company formed under the Act, namely Babybelle Pty Ltd (ACN 116 052 683) ("Babybelle"). In fact, Mr Schwartz sought leave to be appointed a director of Babybelle although the application was not in those terms. 2 In accordance with s 206G(2) of the Act, Mr Schwartz lodged notice of the proposed application with the Australian Securities and Investments Commission ("ASIC") at least 21 days before commencing the proceedings. ASIC forwarded a letter to Mr Schwartz' solicitors informing them that they did not oppose the application and did not propose to attend the hearing of the application. 3 Section 206G is in Pt 2D.6 of the Act which is entitled "Disqualification from managing corporations". Mr Schwartz became disqualified by the operation of s 206B(1)(b)(ii) of the Act which provides that a person becomes automatically disqualified from managing a corporation if the person is convicted of an offence that "involves dishonesty and is punishable by imprisonment for at least 3 months." 4 On 14 April 2005, Mr Schwartz pleaded guilty to 5 charges, namely contravention of s 1350 of the Social Security Act 1991 (Cth), two contraventions of s 215 of the Social Security (Administration) Act 1999 (Cth) and two contraventions of s 135.2 of the Criminal Code Act 1995 (Cth). 5 The prosecution summary was as follows: "1. The defendant was in receipt of Austudy payments between 5 July 1995 and 30 June 1998, and Youth Allowance (student) between 1 July 1998 and 23 October 2003. 2. In early 1998, the defendant advised DEETYA that he was enrolled to undertake a Bachelor of Commerce at Melbourne University between 1 March 1998 and 30 November 1998. On 1 July 1998, Centrelink commenced administration of Austudy and the defendant was transferred to Youth Allowance (student). 3. On 4 December 1998, the defendant advised Centrelink he would be continuing his studies at Melbourne University until 15 November 2002. As a result of lodging his initial claim form with DEETYA, and subsequent contacts with Centrelink, the defendant received payments of Austudy and subsequently Youth Allowance (student) between January 1998 and 24 October 2003. 4. On 11 June 2002, information was received from Melbourne University that the defendant was granted a leave of absence by Melbourne University between 31 July 2001 and 31 December 2001. He did not study at any other institution in this period. The defendant resumed his full time studies at Melbourne University in 2002. 5. As a result of the defendant ceasing study between 31 July 2001 and 31 December 2001, and failing to advise Centrelink of this fact, he received payments of Youth Allowance (student) to which he had no entitlement. (Charges 3 & 4) 6. In addition, the defendant was employed on a casual basis with Priceline between 26 September 1997 and 1 December 2002. As a full time student, the defendant was entitled to an income bank that exempted part of his earnings from assessment for benefit purposes. On 29 October 1999, the defendant's income bank was depleted, and as a result his income began affecting his benefit entitlement. During the charge periods, the defendant earned $34,235 gross, or an average of $450 gross per fortnight. 7. On 21 August 2001, the defendant commenced casual employment with Smart Health Australia. This employment ceased on 26 September 2001. During this period, the defendant earned $1,028 gross. 8. Between 10 October 2001 and 11 November 2001, the defendant was employed on a casual basis with Data Connection Pty Ltd. During this period, the defendant earned $1,746 gross. 9. The defendant advised Centrelink of his employment with Priceline, but under declared his earnings. Although the defendant earned $34,235 from Priceline during the charge periods, he only declared earnings totalling $14,003 during these periods. The defendant did not advise Centrelink of his employment and earnings with Smart Health Australia and Data Connection Pty Ltd. (Charges 1, 2 & 5) 10. As a result of failing to advise Centrelink that he had ceased study in semester 2 of 2001 and under-declaring his earnings he obtained social security payments to which he was either not entitled or only partially entitled. 11. The offending was detected on 11 June 2002 as a result of data matching between Centrelink and the Educational Institution, and on 10 September 20003 (sic) as a result of data matching between Centrelink and the Australian Taxation Office. 12. The defendant was not interviewed in relation to this matter." 6 The amount that was obtained dishonestly was $13,578.94. Mr Schwartz was placed on two good behaviour bonds under s 20(1)(a) of the Crimes Act 1914 (Cth) with $600 recognisance. 7 The circumstances in which Mr Schwartz offended were said to relate to an earlier period in his life. The evidence before the Court, including evidence from Mr Goodman (the sole director of Babybelle), was that Mr Schwartz had repaid his debts, including the debt to Centrelink, and had undertaken counselling. The size and nature of the other debts were not explained. Nor was Mr Goodman's relationship with Mr Schwartz.